Mind The Gap
Source: Datastream and UBS
US profits (dark line) are currently +30% above their pre-crisis levels while International profits (light line) are roughly -30% below. Since the trough in profits in 2009, the S&P has returned approximately 210%, over twice as much as the ACWI ex-US. We think the profit and performance gap between the two regions should close to favor the ACWI ex-US now.
Since 2009, the US has remained more consistently accommodative than other central banks. Therefore, US economic growth and profits remained in expansionary territory while many international regions faced multiple recessions (Europe 2011-13, Japan 2010-12 & 2014-15, Emerging Markets 2014-15).
As we pointed out in our last Chart of Interest Time To Learn a Foreign Language international growth estimates are expected to accelerate vs. the US, which should help close the gap in profits seen above and could fuel a multi-year period of better International returns relative to US.
The indexes used in the chart are unmanaged, and not available for direct investment; they include reinvestment of dividends; they do not reflect management fees or transaction costs: S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks. MSCI ACWI ex-U.S. Index is a float-adjusted market capitalization index that is designed to measure the combined equity market performance of developed and emerging market countries excluding the United States. The ACWI ex-U.S. includes both developed and emerging markets. For investors who benchmark their U.S. and international stocks separately, this index provides a way to monitor international exposure apart from U.S. investments.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2017