Why do people discourage investing only in the US markets?

CreditCardChris

Whenever I Google the question I always read answers like "If the US economy ever takes a downturn..." or answers to that effect, but isn't this a bit of a meme at this point? The US market accounts for 55% of the world economy, never since US markets existed has there been a prolonged downturn in the US markets without the rest of the world also experiencing that same downturn. 

So if the US markets experiences a poor decade, you can absolutely be certain the rest of the world will experience that same poor decade. Also when the US economy is booming, it always does significantly better than the rest of the world. So it's kinda like a win win situation investing only in the US markets? A feel like an S&P index tracker fund is the absolute safest and biggest bang for your buck when investing for the long term. 

If you can disprove this of course then I'm all ears but I'm finding it really difficult right now to find an example where the US didn't do well and the rest of the world did. The US economy doesn't actually have the ability to slow down in my opinion, that country is just bursting at the seams with innovation and prosperity and importantly they have vast amounts of land to assign to building new cities, there's no risk of running out of land to build on (like in the UK) for example.

keyboardworrier

There's a graph on this article showing when international outperformed the US . https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths

thrifty_pete

I think there will be a variance in how the downturn affects different markets. So whilst there is a correlation between the S&P 500 and other regions, there is still some variance. A world tracker would capture this. You might want some Australian mining stocks, or Japanese companies as a defensive in your portfolio.

CreditCardChris

keyboardworrier said:

There's a graph on this article showing when international outperformed the US . https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths

This is really helpful thanks.

Thrugelmir

The S&P 500 is not the US economy. Like the FTSE it's global. Brass plates can be located anywhere. Some listed US companies have their head offices in Eire for tax purposes. 

dunstonh

So if the US markets experiences a poor decade, you can absolutely be certain the rest of the world will experience that same poor decade.

Not so.

This cycle, the US has been the standout performer. Above all others.   In the previous cycle, it was one of the worst performers. There is a very large difference.

For example, from 2000 to 2007 inclusive US equity return minus  17.21%.  i.e. the sector average for US over that 8 year period saw you lose money if you invested in only US equity.  In the same period you had Europe (exc UK) 43.99% up and UK smaller companies (we had this thread before about UK and US) was up 57.72%.  Asia was up 104.78%.  Japan was worse than US at minus 39.8%.

That is US equity as a sector (and others as sectors too as comparing sectors allows for greater history).  Others do not follow as closely as you think.  

A feel like an S&P index tracker fund is the absolute safest and biggest bang for your buck when investing for the long term. 

It is neither safest or biggest.  You also have to consider that we deal in Sterling. So, exchange rate comes into play.    In this period, Sterling fell in value.  That as a double win for those with global investments (including US).   However, when Sterling rises, it will be a drag on global investments (including US).

CreditCardChris

dunstonh when Sterling rises

That's quite the assumption.

I don't believe the pound will ever gain significantly on the dollar or euro again. Our currency is no longer in demand like it was back in the 2000's and I don't see a situation in which the UK economy / currency becomes "in demand" again. We have pretty much exhausted our innovation, our land and now we're just floating around simply existing.

The UK completely failed to go into the tech game and we got left behind. Kinda like how Blockbuster and Kodak failed for not getting involved in the digital age. Of course we can still innovate and create great tech companies but the problem is our society, our youth has no interest in building killer tech companies.

It might sound like i'm picking on the UK but the same can be said for other countries. For example how many Danish or Portuguese tech companies do you know? It's not that the citizens of these countries are stupid... It's that they have no desire to create tech companies. Like China, America or Japan for example.

dunstonh

That's quite the assumption.

1) it wasnt stated as a fact of what will happen.  It was stated as what happens when Sterling rises and falls.

2) Sterling has been in the ballpark it is now before.    People thought it wouldn't go up again and guess what? It did.   This country has been written off so many times but keeps coming back.   A lot of it is goes through cycles. 

We have pretty much exhausted our innovation

You are kidding aren't you?   The UK is a breeding ground for innovation.   The problem is implementation on a wide scale.  Bigger fish, usually based in Asia or US tend to come in buy UK innovation and implement in a way that the UK is not very good at doing.

ur land and now we're just floating around simply existing.

Yet, UK equities in the smaller/mid cap perform equally or better than the US historically.

The UK completely failed to go into the tech game and we got left behind. 

We lagged in some areas but led in others.  However, as said above, our potential kept on being bought.    In some areas though we are market leaders.  Just nothing on a large consumer scale.

Thrugelmir

CreditCardChris said:

dunstonh when Sterling rises

The UK completely failed to go into the tech game and we got left behind.

You obviously know little of the tech sector in the UK. 

CreditCardChris

dunstonh said:

That's quite the assumption.

1) it wasnt stated as a fact of what will happen.  It was stated as what happens when Sterling rises and falls.

2) Sterling has been in the ballpark it is now before.    People thought it wouldn't go up again and guess what? It did.   This country has been written off so many times but keeps coming back.   A lot of it is goes through cycles. 

We have pretty much exhausted our innovation

You are kidding aren't you?   The UK is a breeding ground for innovation.   The problem is implementation on a wide scale.  Bigger fish, usually based in Asia or US tend to come in buy UK innovation and implement in a way that the UK is not very good at doing.

ur land and now we're just floating around simply existing.

Yet, UK equities in the smaller/mid cap perform equally or better than the US historically.

The UK completely failed to go into the tech game and we got left behind. 

We lagged in some areas but led in others.  However, as said above, our potential kept on being bought.    In some areas though we are market leaders.  Just nothing on a large consumer scale.

Well you have a lot more optimism than I do but since the age of around 18 I've watched innovation and subsequently the economy of the country reduced to just another country. Investors don't just wake up one day and decide to start buying the pound and investing in UK equities... We need to create companies that dominate, Google or Amazon style.

I see three new industries opening up in the next 20 years. AI, alternative energy and "space mining". Only time will tell if the UK sits on the sidelines again. 

Thrugelmir

CreditCardChris said:

dunstonh said:

That's quite the assumption.

1) it wasnt stated as a fact of what will happen.  It was stated as what happens when Sterling rises and falls.

2) Sterling has been in the ballpark it is now before.    People thought it wouldn't go up again and guess what? It did.   This country has been written off so many times but keeps coming back.   A lot of it is goes through cycles. 

We have pretty much exhausted our innovation

You are kidding aren't you?   The UK is a breeding ground for innovation.   The problem is implementation on a wide scale.  Bigger fish, usually based in Asia or US tend to come in buy UK innovation and implement in a way that the UK is not very good at doing.

ur land and now we're just floating around simply existing.

Yet, UK equities in the smaller/mid cap perform equally or better than the US historically.

The UK completely failed to go into the tech game and we got left behind. 

We lagged in some areas but led in others.  However, as said above, our potential kept on being bought.    In some areas though we are market leaders.  Just nothing on a large consumer scale.

Well you have a lot more optimism than I do but since the age of around 18 I've watched innovation and subsequently the economy of the country reduced to just another country. Investors don't just wake up one day and decide to start buying the pound and investing in UK equities... We need to create companies that dominate, Google or Amazon style.

I see three new industries opening up in the next 20 years. AI, alternative energy and "space mining". Only time will tell if the UK sits on the sidelines again. 

Unless you invest in the new industries from the outset. They will simply be sold to overseas investors. Short termism is unfortunately a very British trait. Look at major German companies in comparison. Almost without exception they had an influence on the WW2 war effort.