Weekly Buzz: 🦅 US stocks have never outperformed for this long

01 March 2024

If you asked a room of investors which asset is the most surefire bet out there, there’s a good chance many would say the US stock market – let’s take a closer look at why.

Why is the US so attractive?

It’s hard to disagree with investors confident in the US: its stock market is home to some of the world’s highest-quality companies, thrives on the globe’s wealthiest consumer market, and enjoys the backing of the world’s leading reserve currency (our Simply Finance section below gives a breakdown).

It’s hardly surprising then, that US stocks have often left their global counterparts in the dust. In the chart below, we see that the S&P 500 has outpaced the rest of the world’s equity markets for the past twelve years or so – and it just hit another all-time high.

So should you put all your eggs in the proverbial American basket? Well, the S&P 500 might (or might not) be on the verge of a downturn. It might (or might not) be outpaced by stocks from other regions. The fact is that the future is unpredictable.

US stocks have seen sharp and extended periods of underperformance, as the chart above illustrates. For example, we saw this back in 1987, with Black Monday.

What are the takeaways here?

Unless you’ve got a working crystal ball, having the right asset allocation strategy (an optimal proportion of investments across different regions and asset classes) is still one of the most reliable strategies for achieving long-term returns.

Yes, the US can be a key contributor in your investment portfolio. In our next CIO Insights, we took a deep dive into the country, revealing opportunities across its various industries. Having said that, it’s important to keep an open mind to the opportunities available globally. Adding some international flavour to your portfolio can open it up further to the benefits of diversification.

If you’re optimistic about the US stock market and want additional exposure to this country, consider our Flexible Portfolios. These customisable portfolios let you invest directly in an ETF which tracks the S&P 500 index, giving you broad exposure to the US equity market.

📰 In Other News: Housing prices are warming up

Residential properties across 37 high-income, developed economies were, on average, 2.1% more expensive in Q3 of 2023 than in Q2 (these numbers come through with a lag).

British, Canadian, and Australian prices were on the up, spurred on by the combination of strict building regulations and people moving into the countries. Plus, houses in the US picked up by more than 5% from January to November last year. But in countries where renting is most common, like Germany, Denmark, and Sweden, prices are expected to stay on the slide.

Property markets are an important part of any economy. If central banks do start cutting rates later this year, more hopeful homeowners can consider taking out mortgages, offering the housing market more sustainable support.

These articles were written in collaboration with Finimize.

🎓Simply Finance: Reserve currency

Central banks keep large amounts of foreign currency as reserve currency to store value, facilitate global transactions or investments, and protect against economic or financial risks. Usually, these come in the form of currencies like the US dollar or the euro, which are widely trusted for global trade. The US dollar’s status as the world’s leading reserve currency also lends it a certain influence on the world’s economy.

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