American stock markets have delivered some exceptional performance in recent years. Just look at the Standard & Poor’s 500 (S&P 500) Index. Barron’s reported the S&P 500, including reinvested dividends, has returned 215 percent since April 30, 2009. The index is currently trading 50 percent above its 2007 high.
The rest of the world’s stocks, as measured by the MSCI EAFE Index, which includes stocks from developed countries in Europe, Australia, and the Far East, returned 97 percent in U.S. dollars during the same period. At the end of April, the MSCI EAFE Index was 20 percent below its 2007 high.
If you subscribe to the ‘buy low, sell high’ philosophy of investing then these performance numbers may have you thinking about portfolio reallocation. However, performance doesn’t tell the full story.
For example, there’s a significant difference between the types of companies included in the two indices. At the end of April, Information Technology stocks comprised 22.5 percent of the S&P 500 Index and just 5.7 percent of the MSCI EAFE Index. Financial stocks accounted for 14.1 percent of the S&P 500 and 21.4 percent of MSCI EAFE.
It’s important to dig beneath the surface and understand the drivers behind performance before making assumptions or changing portfolio allocations.
Even so, European stocks have the potential to deliver decent performance this year, according to Barron’s. “The case for a revival in European stocks, particularly the Continent’s many multinationals, rests in large part on expectations for improving global growth…This year Europe’s GDP is expected to increase by about 2 percent, after growing 1.7 percent in 2016 – better than the U.S.’s 1.6 percent.”
Last week, the S&P 500 Index moved slightly lower. Today it was lower still. Instead of focusing on day-to-day or month-to-month changes in the market, remember that investing for your future is a marathon, not a sprint. It’s years, not months, that matter.
* These are the general views of Jonathan DeYoe and they should not be construed as investment advice for any individual.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The original “Weekly Commentary” was prepared by Peak Advisor Alliance. Jonathan DeYoe is a member of Peak Advisor Alliance and adds, subtracts and edits before publishing.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
* Stock investing involves risk including loss of principal.
* “Does Performance Tell the Whole Story?”
http://www.barrons.com/articles/europe-on-sale-time-to-buy-foreign-stocks-1494648930?mod=BOL_hp_highlight_1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-15-17_Barrons-Europe_on_Sale-Time_to_Buy_Foreign_Stocks-Footnote_1.pdf)
http://us.spindices.com/indices/equity/sp-500 (Click on Sector Breakdown to view pie chart) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-15-17-S%26P_Dow_Jones_Indices-Sector_Breakdown-Footnote_2.pdf)