FYI: Meb Faber’s Idea Farm reminds us that the Credit Suisse Global Investment Returns Yearbook 2018 should be oin your reading list. It is chock full of wonderful charts and tables and notes.
Two images struck me as so very insightful and revealing.
The first is the relative sizes of world stock markets, from 1900-2017. As you can see above, the US was a mere 15% of the global pie at the start of last century; today it is over half (by capitalization). That makes me wonder if those prior levels of high U.S. returns will be sustainable for the next century.
Second, look at the ebbs and flows in the chart below, titled evolution of equity markets over time from end-1899 to end-2017. The USA has seen its global share rise and fall several times. Note how Japan ballooned up during 1990s & 90s; it became almost half of the global market cap.
The lesson for investors is three part: Be aware of your own home country bias; understand how this balance shifts over time; and hold a globally diversified portfolio.
Review your own portfolios (investment, retirement, etc.) If you find your holdings significantly overweight US stocks, consider more exposure to Emerging Markets and Developed Ex-US. You will likely reduce overall volatility, lower risk, and could actually improve your returns.
Regards,
Ted
http://ritholtz.com/2018/02/global-assets-1900-2017/
