According to experts, the US equity market has been the best place to invest in the last decade. But it looks as if this dominance could change in 2020.
Many financial experts believe that the US stocks will be outperformed by some of the global stocks. For the record, this has only happened twice since 2010. The US stocks have always had their performance much better than their global counterparts.
This decade has seen the fared even worse than the S&P 500. Since 2010, the iShares of the MSCI Emerging Market Index is up by just 4% over the entire decade.
However, the experts believe that as we are heading toward an economic slowdown the global stocks are expected to topple the US counterparts due to better growth and valuations. Also, the central banks of these countries have taken more measures to improve their economy.
The price-to-earnings ratio that is a widely used metric on Wall Street has currently a value of more than 20. But despite hitting the all-time highs, the earnings have declined. International stocks have a trade value much lower. The price-to-earnings ratio of the ACWI fund at the close of Friday was at 14.7.
Currently, there is a wide valuation gap between the US and international stocks. It is due to the global economic slowdown and the weakening Euro. On the back of the US markets’ fantastic performance, the US GDP expanded by 2.1% in the third quarter.
The economies of the other countries around the world have performed poorly o the back of less manufacturing activity and the tightening global trade.
The manufacturing activity in Europe fell to a seven-year low in October. Despite some rebound in November, it is still well below par. But these factors have been countered by the central banks in the countries through various means.