July 24th, 2007

U.S. vs. Foreign Stocks: A Follow-up

The foreign ETFs continue to move higher so it reminded me of an earlier post. In my December 30, 2005 post entitled “U.S. vs. Foreign Stocks: Oil and Gold Stocks“, when I was lamenting the market’s poor performance in 2005, I wrote:

But there may be an upside in all this. If you believe that everything ultimately “converges to the mean”, then next year might actually see the beginning of a bull market in US stocks as as they begin catching up with foreign stocks that either show little growth or even declines.

Another 18 months have passed and, while the US markets increased over 20% as measured by the S&P 500, foreign markets as measured by their ETFs continue to outperform. Here is an update of that earlier table:

While everyone continues to fret about the market’s climb, we still lag behind the rest of the world. It only continues to prove that, today, it is truly a global economy. With the value of the $US continuing to support exports, companies with a large international business are the places to have money. Additionally, businesses that have their own market-based prices which, when translated into $US, show dramatic earnings growth. Finally, or course, foreign companies sold as adr’s and foreign ETFs serve the same purpose.

While market increases seem high by historical standards, the global economic environment has no precedent. My guess is that the market will continue driving higher, continuing to catch up to foreign markets or, at the very least, staying even with them. This party won’t end until and unless there is a slow-down brought about by a major external even of a global political, social or economic variety.

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