Should I transfer all my S&P 500 into a global tracker?

dunstonh

This is the decade at the start of the millennium.



Some of the reason that decade with US equity was negative is why US equity was better in the following decade but it does highlight the risk of investing in just one country or region.      Many of those investing 100% in US equity are doing so due to recent performance in a period when Sterling fell against the dollar and US equity was the best place to be.  An ideal alignment for UK investors based in Sterling.   They forget what happens when it goes the other way or are not experienced enough to realise it can happen.

Voyager2002

[Deleted User] said:

It's my SIPP I'm talking about. 

Thanks for all the responses.  I'm only 40 so a way to go before retirement so I've just submitted my request to transfer the whole lot from S&P 500 to Global All Cap.  If I lose a couple of quid in the transfer so be it, if I gain a few so be it.  Hopefully I won't need to do any big changes like that again.  I'm now just "set it and forget it". 

I think that is a smart move.

As some posters have pointed out (a point underlined by Dunston's post), investing only in the USA exposed you to greater volatility than would investment across the entire global economy. That risk paid off for you, since the S & P 500 rose by 25 per cent over the last year. There is, of course, no reason to believe that this performance will be repeated next year. So you have now secured those gains by selling at this point, and have moved your resources into a less volatile investment: you have reduced your chances of further spectacular gains but also protected yourself to some extent against the chance of loss. 

You might also consider investing in bonds.

John464

Comforting to see how much the S&P500 has risen, but scary to think how much it could fall
Since we have passed the point where one US company is worth FAR more than the entire FTSE100 !!!!
I have recently taken a large chunk out of the S&P500 and put it in the FTSE100.  
Predicting the future is notoriously difficult and I don't know whether its a good move.
So I am not suggesting anyone else does it, just saying I have done it.
But if I hadn't done it and the S&P500 had crashed, I would look back on this time with all the wisdom of hindsight and say the S&P500 was so obviously in a bubble why didn't I see it?

masonic

John464 said:

Comforting to see how much the S&P500 has risen, but scary to think how much it could fall
Since we have passed the point where one US company is worth FAR more than the entire FTSE100 !!!!
I have recently taken a large chunk out of the S&P500 and put it in the FTSE100.  
Predicting the future is notoriously difficult and I don't know whether its a good move.
So I am not suggesting anyone else does it, just saying I have done it.
But if I hadn't done it and the S&P500 had crashed, I would look back on this time with all the wisdom of hindsight and say the S&P500 was so obviously in a bubble why didn't I see it?

It's worth remembering that the maximum any index can fall is the same, and we have seen similar percentage falls in the two markets during the worst crashes of the past. S&P500 doesn't look particularly bad on valuation terms (trailing P/E shown below, but forward P/E is similar):

The UK market does look cheap by comparison (about half the P/E), but is it cheap for a good reason? It's notable that in the past 30 years the S&P500 has never fallen to the valuation level currently seen in the UK, even at the bottom of the worst crashes. Are the companies who happen to have chosen to list on the UK rather than US market due some sort of comeback? Are the success stories of tomorrow more likely to list on one index rather than the other? Both indexes are made up primarily of international companies.

I've been somewhat underweight US equities for over a decade, particularly in the late 2010s and either side of the Covid crash. This has cost me in terms of returns, but that's the cost of not wishing to be over-concentrated in particular sectors or individual companies. Even over the long term, I don't expect the effect to be positive.

John464

masonic said:

 Are the success stories of tomorrow more likely to list on one index rather than the other? 

Yes - both the successes and failures of tomorrow are more likely to list in the US than the UK because the same companies cost more in the US.
Which is another reason why I took half out of the S&P500 and put it in the FTSE100
(I still have the majority in world trackers)
Yes the UK is cheap for a reason.  But with about 75% of FTSE100 companies profits being generated abroad does it make that much difference where they are listed?
We have Brexit and a bad Government.
But that is priced in
and next year we could have a better Government and the US could have Trump?

masonic

I agree with you in principle that it should not really matter where a company lists, but suspect the reality is rather different, with a US listing giving better access to capital and greater visibility and reach. This is perhaps why some companies in the US are able to generate the revenue of small countries and no company listed exclusively outside the US features in the top 10 holdings of a global index. But what really matters at the end of the day is the companies within the index and their ability to drive growth. So which of the companies in the S&P500 or FTSE100, either today or tomorrow, are best placed to capitalise on the opportunities of tomorrow? To me this is more important than any concerns around local political issues, and I suspect the likes of Shell, AstraZeneca, HSBC, Unilever, et al, are not particularly weighed down by those you mention, whereas I can think of other reasons some of the biggest FTSE100 companies might not be at the vanguard of the next leg up in global markets.

Bostonerimus1

[Deleted User] said:

It's my SIPP I'm talking about. 

Thanks for all the responses.  I'm only 40 so a way to go before retirement so I've just submitted my request to transfer the whole lot from S&P 500 to Global All Cap.  If I lose a couple of quid in the transfer so be it, if I gain a few so be it.  Hopefully I won't need to do any big changes like that again.  I'm now just "set it and forget it". 

I think this is sensible. I'm a big advocate for keeping things simple and not trading or fiddling with things too much once you are happy with your investments. But that should not stop you from managing your finances in general. So use your pension and ISA allowances to be tax efficient. Keep your emergency cash fund healthy and make sure you have the right type and amounts of insurance and monitor your budget so you don't waste money, be mindful of what you spend.

coastline

John464 said:

Comforting to see how much the S&P500 has risen, but scary to think how much it could fall
Since we have passed the point where one US company is worth FAR more than the entire FTSE100 !!!!
I have recently taken a large chunk out of the S&P500 and put it in the FTSE100.  
Predicting the future is notoriously difficult and I don't know whether its a good move.
So I am not suggesting anyone else does it, just saying I have done it.
But if I hadn't done it and the S&P500 had crashed, I would look back on this time with all the wisdom of hindsight and say the S&P500 was so obviously in a bubble why didn't I see it?

It's all opinions really what happens in the future and most understand the SP 500 is standing at a premium to other indices. It's a premium that's been around years and will it hold ? First thing to say the P/E valuations are an average and are influenced at the moment by the Mega 7. There's a difference as shown below and others aren't as highly rated. 

F8japLjWAAA5MXN (700×420) (twimg.com)

It's nothing like the dotcom era of 2000 . This explains some of the underperformance from 2000-2010 by the SP 500 compared to other indices. From year 2000 the SP 500 unwound just like the rest of the markets.

FxDH2whXsAAo3cC (701×598) (twimg.com)

From the Shiller and Cape analysis , over 100 years ,the SP has spent most of it's time around 15-20 anyway. There's three distinct periods where it got to extremes . 1929 the US index rose 300% in just a few years so a crash should have been an alert. I'm sure it would today. The 2000 boom was a genuine case of total overvaluation and the FTSE has hardly recovered apart from dividend payments. During the 2020 pandemic companies were hit with one off events and this skewed the valuations which have since recovered. Look also at the rainbow chart in the link where it's been in the fair value/expensive range since 1990. Does this mean don't buy the US markets ? 

 S&P 500 CAPE ratio says the US index is in an epic bubble – UKValueInvestor

Totally skewed by the one off event in 2020.

GBltRJRWMAAg8yA (900×653) (twimg.com)

Rainbow chart for the FTSE shows it's been cheap since 2000 but there's no re-rating ? Way before brexit etc..

FTSE 100 CAPE valuation and long-term forecast – UKValueInvestor

There's a table here showing forward earnings 2024 and it's clear UK and Europe are on lower valuations. What to do ? Maybe buy a global tracker and let the market decide ? Good luck everyone for 2024.

FTSE 100 analysis: Are UK stocks undervalued? (forex.com

just in today from Pensioncraft.

Where To Invest 2024 (youtube.com)

John464

There is another reason I think the UK stock market is undervalued.  UK investors have largely deserted the UK stock market because Government interventions in the housing market have made housing more attractive to investors.  Over 60% of UK equities are foreign owned by people who weren't in a position to capitalise on the UK rentier economy.
On top of that, there are other huge incentives to invest in other assets - like agricultural land and trusts which can be passed on free of inheritance tax.  All of which starves the UK market of investment and adds to the under-valuation.

masonic

John464 said:

There is another reason I think the UK stock market is undervalued.  UK investors have largely deserted the UK stock market because Government interventions in the housing market have made housing more attractive to investors.  Over 60% of UK equities are foreign owned by people who weren't in a position to capitalise on the UK rentier economy.
On top of that, there are other huge incentives to invest in other assets - like agricultural land and trusts which can be passed on free of inheritance tax.  All of which starves the UK market of investment and adds to the under-valuation.

Do you really think this is the case? UK investors make up a very small proportion of the market. I find it hard to believe that Government interventions in the housing market are impacting the appeal of UK-listed stocks. Supposing inheritance tax is abolished, as has been leaked to the press, will this really result in UK stocks becoming the preferred place for capital to be parked? I'm really struggling to see domestic housing policies influencing the FTSE100, or even the FTSE All share, though happy to be corrected.