Chart of the Day: February 25, 2023
Investors may pay for 🇺🇸 home country bias.
It’s the weekend so today's Chart of the Day will be presented with little commentary.
Today we have a chart from @MichaelAArouet via @IsabelNet_SA, see Figure 1. The chart displays 120+ years of relative investment performance of US stocks vs the rest of the world (blue line). The dotted, red horizontal line shows the average of the relative index and the red horizontal lines at the top and bottom show +/- 1.5 standard deviations from the average. If the blue line is stretched to one of the top or bottom red lines it can be interpreted as an over- or undervaluation.
Currently, Figure 1 shows that US stock market performance has been historically strong vs the rest of the world since the 2008 financial crisis. This outperformance has now reached historic extremes. In the past, reaching this level preceded an extended period of relative underperformance for the US vs the rest of the world.
Periods of US stock market underperformance vs the rest of the world can last a decade or longer. This could present a significant risk to performance for investors with portfolios heavily weighted toward US companies, and by extension underweight international stocks.
Will history repeat?
— Brant
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