• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Stock Trend Alerts

Essential Market Ideas and Investing Strategies

  • Newsletter Reviews
  • Hot Stocks
  • Technology
  • Financial News
  • Secrets of the Pros
  • Analysis
Home » Are International Stocks the Better Buy Today?

Are International Stocks the Better Buy Today?

The stock market in the United States has outperformed other markets for a long time now – 10 years, to be exact.

The chart below compares the performance of the S&P 500 over the past decade with the performance of an index of international stocks.

The comparison isn’t even close… It has been American domination.

An investor who put $10,000 into the S&P 500, as represented by the SPDR S&P 500 ETF (NYSE: SPY), a decade ago is now sitting on $32,920.

A similar $10,000 investment in the international iShares MSCI ACWI ex U.S. ETF (Nasdaq: ACWX) is now worth only $13,200.

But these stretches of outperformance are cyclical, and history suggests that this cycle of American stocks leading is getting long in the tooth.

In the past, on average, a period of cyclical outperformance like this had lasted 7.6 years.

At around 10 years old, this cycle is already well past that…

It’s time to hand the ball back to international stocks so they can have their turn.

There are also fundamental reasons investors should look internationally for places to put new money to work today…

[Exclusive: The Clock Just Started on the Biggest Stock Market Event in Twenty Years]

Why International Stocks Are the Better Buy Today

Much of the outperformance of the S&P 500 has been driven by the fact that the index is heavily concentrated in expensive tech sector growth stocks.

While the S&P 500 does hold 500 different stocks, the five largest companies account for 21% of the index.

The market hasn’t been this top-heavy since the start of 1970, when the top five holdings in the S&P 500 were IBM (NYSE: IBM), AT&T (NYSE: T), General Motors (NYSE: GM), Standard Oil of New Jersey and Eastman Kodak (NYSE: KODK).

That heavily concentrated S&P 500, which went into 1970 at 90.31, had fallen to 72.56 by 1974.

And at the end of the 1970s, the S&P 500 sat at just 110.9, which was a return of only 22% for those 10 years.

The last time the market was this concentrated was not a buying opportunity…

A bet on the S&P 500 today is essentially a bet that Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Amazon (Nasdaq: AMZN), Google owner Alphabet (Nasdaq: GOOGL) and Facebook (Nasdaq: FB) will continue to grow as they have for the past decade.

Maybe they can, but all of these companies (except Facebook) already sport $1 trillion-plus stock market valuations.

[Alert: Rare convergence of 3 economic triggers is about to set off a buying frenzy in tech stocks]

At some point, size becomes a major anchor on growth.

By contrast, an international stock index like the MSCI World ex USA is much more diversified.

The top five international stocks account for just 6.8% of that benchmark.

Plus, more diversification isn’t the only reason to go international today.

International companies have more exposure to Asia and other emerging markets with faster-growing middle classes and higher rates of GDP growth.

And over time, earnings growth is what drives stock prices. That is why big U.S. tech stocks have performed so well over the past decade.

Investing outside the U.S. also provides exposure to currencies other than the U.S. dollar.

That can’t be a bad idea today given the astounding amount of debt the Federal Reserve has accumulated in its response to COVID-19.

And, of course, international stock valuations are considerably lower than those in the U.S.

On a price-to-cash-flow basis, the MSCI World ex USA Index trades at 60% of the valuation of the S&P 500.

Considering all of this, it looks like the perfect time for some international diversification…

Good investing,

Jody

[Learn More: The next couple months could determine who will become extremely wealthy in 2021 – and who won’t]

Read more from Jody Chudley at WealthyRetirement.com

You Might Also Like...

  • Profit from the Global Transition to Electric Vehicles with these 5 Penny Stocks
  • Economic Recovery Sets the Stage for this Trio of Value Stocks to Outperform
  • Insiders are Buying Up these High-Yield Dividend Stocks
  • The 4 Top Artificial Intelligence Stocks as Demand Continues to Soar

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Primary Sidebar

Subscribe to Stock Trend Alerts

By submitting your email address, you give Stock Trend Alerts permission to deliver investment research to your email inbox. Privacy Policy | How It Works

Popular Posts

  • Martin Weiss Docket No. OP–1670: 12 Inflation-Beating Stocks
  • Jim Rickards – The Return of American Energy: Profit from the Green Lie
  • Louis Navellier Growth Investor: Secure Your Savings From The CBDC
  • Biden’s Big Blackout: Jim Rickards’ Strategic Intelligence Review
  • Marc Lichtenfeld Oxford Income Letter: The #1 Oil and Gas Income Play for 2023
  • Dan Ferris Report: The Only Stocks That Can Safely 8X Your Money During America’s “Dead-Zone”
  • Eric Fry’s Investment Report: The Revenge of the Heartland #1 AI Powered EV Stock
  • Marc Chaikin Reveals Biggest Stock Prediction of his 50-year Career on Wall Street

Recent Posts

  • Dylan Jovine Search & Destroy: 3 AI Software Stocks Revolutionizing Warfare
  • Alpha Investor Charles Mizrahi: Energy Fortunes No. 1 Stock Recommendation
  • Luke Lango’s Innovation Investor: Area 52 The Quantum Windfall Report
  • Nick Black Digital Fortunes Network: Four Digital Pyramid Stocks for Generational Wealth
  • Review: Porter Stansberry and The Big Secret on Wall Street – The Forever Term

Topics

AAPL Advertorial Amazon AMZN Artificial Intelligence Battery Bear Market Biotech Bitcoin Blockchain Clean Energy Cloud Computing Coronavirus COVID Creative Cryptocurrency Dividends E-Commerce Electric Vehicles Elon Musk Energy Ethereum Gold Growth Stocks Inflation Interest Rates International Jeff Brown Louis Navellier Market Crash MSFT Oil and Gas Options Prediction President Biden Recession Retirement Russia Semiconductor Supply Chain Tesla The Fed TSLA Volatility Warren Buffett

Copyright © 2023 · Stock Trend Alerts - Essential Market Moves and Investing Ideas

Nothing on this website should be considered personalized financial advice. Any investments recommended here in should be made only after consulting with your personal investment advisor and only after performing your own research and due diligence, including reviewing the prospectus or financial statements of the issuer of any security.

Stock Trend Alerts, its managers, its employees, affiliates and assigns (collectively "The Company") do not make any guarantee or warranty about the advice provided on this website or what is otherwise advertised above.

The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. The Company is not affiliated with, nor does it receive compensation from, any specific security.

To the maximum extent permitted by law, the Company disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations provided herein prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.

About Us | How it Works | Privacy Policy | Terms and Conditions | Contact Us