America The Beautiful

JC Parets
November 15, 2016

When we talk about asset allocation, similar questions often come up: More International stocks? More Emerging Markets? More US Investments? Where do we rotate as we head into next year? These are all common themes normally brought up in this type of conversation. So using only facts to help our decision making, let's look at price and see what, if anything, it is pointing to.

This is a chart of the S&P500 ETF $SPY compared with the ACWI Ex-US Index ETF $ACWX:

SPY-ACWX

Keep in mind that the ACWI Ex-US Index consists of large and mid cap stocks across 22 of the 23 developed market countries (excluding the US) and 23 Emerging Market countries. The fund has roughly 17% in Japan, 12% in the UK, 7% in France, 7% Canada, etc. Approximately 22% is in Financials, 11% Industrials, 11% Consumer Discretionary, 10% Consumer Staples, 9.5% Tech, etc. Here is the full breakdown:

msci ex us

I think the bigger point here is the consistent outperformance from of the U.S. Stock Market. Once again this month (before the election, to be clear), the spread between the US and the rest of the world found support at the uptrend line from 2011. This keeps the spread within its uptrend channel from the past 6 years well-defined by two parallel uptrend lines.

The evidence here continues to suggest erring on the side of the US over everyone else. While there are some exceptions for sure, especially in certain emerging markets, the United States is the big winner here and this trend is still in place. Nothing has changed. If and when it does, you'll hear it here first.

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