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Global Performance Gap

Global stock markets have been underperforming the US since about 2013.  Global GDP peaked in 2014 and has been growing at an anemic 3% rate.  The primary drivers have been slowing growth in China and lower prices for commodities and petroleum (which disproportionately affected commodity exporting emerging markets).  Global central bank policies that artificially suppressed interest rates have likely made things worse.

China’s economy might not have stabilized yet but it does appear that prices for commodities and petroleum reached a bottom in 2016.  Interest rates are far from rational levels but they too are moving up.  I think these factors bode well for the global economy and thus my recent move into foreign stock ETFs.

The below chart illustrates the significant performance gap between global markets and the US.  This divergence occurred in 2013 and the gap has broadened since the November presidential election.  Short of a tariff trade war, I believe that global stocks will outperform the US.


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