Investors, economists and the media spend an enormous amount of time and energy trying to forecast the economy. The idea is that forecasting economic growth will give us an idea of where the stock market is headed. Surprisingly, no predictive relationship exists between current economic conditions and the current stock market.
The surging US economy and stock market have left international markets behind, with the S&P 500 Index beating the MSCI EAFE Index1 by 7.1% per year for 11 years. But US equities don’t always outperform the rest of the world, and the potential of international equity returns shouldn’t be overlooked. Currently, most investors are under-allocated to international equities and now might be a good time to invest more overseas.
With the recent market decline, increased volatility and the deafening media noise, it can be easy to lose track of the basics. Remember, recent activity doesn’t tell us much about market returns.
There is mounting concern about geopolitics, interest rates, the economy and the length of the current market expansion. A long-term view can help to put things in perspective and perhaps relieve some anxiety.