This year was flagged by many as the one when non-US markets would finally outperform their American counterparts. Instead, it has been yet another year of US dominance.
International markets made up lost ground relative to the US in the closing months of 2020 but it was a false dawn. The S&P 500 has outperformed iShares’ emerging markets ETF (exchange-traded fund) by 19.5 percentage points this year – the second-widest spread since 2004, notes Bespoke Investment.
The US has also trounced the rest of the world with a performance gap of 12.4 percentage points, the firm adds.
There has never been a period of such sustained outperformance. JPMorgan’s latest quarterly Guide to the Markets shows that, over the last 14 years, the US has outperformed the rest of the world by 240 percentage points. As a result, it now accounts for a record 60 per cent of the MSCI All Country World Index.
JPMorgan’s guide also shows non-US markets have themselves enjoyed lengthy periods of outperformance in the past. Timing the next turn is impossible, but widening valuation differentials suggest such a turn will come in time.
The MSCI World ex-US index trades on a PE of 14.3, only fractionally above its long-term average. In contrast, the S&P 500 trades on a price-earnings (p/e) ratio of 20.9 – well above its 20-year average of 15.5.
