These World Stock Markets Are Beating the U.S.

U.S. stocks have been on a tear of late, accelerating since Donald Trump was elected President and breaking to new highs since his inauguration. The S&P 500, America’s benchmark index, is up 12.7% since November 4, and 5% so far this year. That’s a strong return. But it pales in comparison to the returns of many other world stock markets this year.

According to Morningstar, 25 world stock markets have posted a better return than the S&P’s 5% so far this year. The average 2017 return among all world stock markets is 5.7%. Here are a few that have exceeded that average (as measured in U.S. dollar returns):

  • Argentina: 31.2%
  • South Korea: 16.7%
  • India: 15.5%
  • China: 15.4%
  • Mexico: 14.8%
  • Brazil: 12.9%
  • Singapore: 12.8%
  • Chile: 12.8%
  • Taiwan: 12.3%
  • Spain: 11.9%
  • Sweden: 9%
  • Switzerland: 8.1%
  • Malaysia: 8%
  • Germany: 6.6%

Many of those are emerging markets, and a lot of them are bouncing back from rough 2016s. China’s Shanghai Composite index, for example, was down 12.3% last year. Spain’s IBEX 35 index tumbled 2%. And the SMI Swiss Index fell 6.8%. After a down year, there were a lot of bargain stocks to be had in those markets.

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Bigger picture, however, the strength of these world stock markets is a reflection of the rebound in the world economy in the eight years since the global recession. Some countries have taken longer than others to recover; others, including several prominent European nations (Greece, Italy and Portugal come to mind), remain buried under a mountain of sovereign debt. But overall, the global economy is much healthier than it was even four or five years ago. And as economies around the world have improved, international and U.S. investors alike have jumped back into the pool.

My larger takeaway, though, is this: Overseas markets, particularly emerging markets, are a good place to invest your money right now. But the U.S. market—deemed wildly overvalued by some—still has significant room for long-term growth. The 12.7% run-up since the election may feel unsustainable, but in reality, it’s been rather modest compared to what’s happened in other world stock markets. And remember, prior to this four-and-a-half-month rally, U.S. stocks spent nearly two full years trading flat. On December 1, 2014, the S&P 500 was at 2,075 points; on the Friday before Donald Trump was elected President, the index closed at 2,085 points.

Two years of almost no movement is rare for U.S. stocks, at least in the absence of a dot-com bubble bursting or a subprime mortgage lending crisis. There have been no such calamities in the past three-plus years, and yet share price movement has been decidedly mild even after the recent run-up.

Bottom line: don’t let record stock prices dissuade you from buying U.S. stocks, especially those with good-looking charts. International and emerging market stocks may have better momentum—and if you want suggestions on which to buy, I highly recommend taking out a subscription to Paul Goodwin’s Cabot Global Stocks Explorer advisory. But U.S. stocks may have even greater upside after years of modest returns.

Chris Preston

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