Stocks Have a Big, Expensive Problem
Strange times are afoot in the investing world. Your portfolio probably isn’t ready for them.
The U.S. stock market is the big dog of the global stock market, and recently it has taken on Clifford proportions at two-thirds of global market value. That outweighs America’s one-quarter of the world’s economy and 4% of the world’s population, but the U.S. tail has usually wagged the global dog.
Recently, though, that relationship has broken down. It could signal an investing upheaval, and very poor returns for big U.S. stocks in coming years. Analysts at DataTrek Research note that the usual correlation between the main U.S. benchmark, the S&P 500, and MSCI EAFE, an index of non-U.S. developed stocks, has historically been a very high 0.83. Over the past 100 days, it has been 0.54.