Chart of the week
American Exceptionalism
What does this chart show?
The relative performance of U.S. stocks versus ex-U.S. stocks (VOO / VEU): U.S. stocks have outperformed stocks in the rest of the world by 9% per year over the last 15 years1.
Why does it matter?
Equity investors that have embraced global diversification have been burned the last 15 years, and it’s worth asking if something has fundamentally shifted, especially since the 40-years prior to the start of this chart ex-U.S. stocks had performed nearly identically to U.S. stocks2.
The YTD dispersion of returns between the two groups has given new hope to the battered souls that have stuck with international stock diversification; ex-U.S. stocks are currently outperforming U.S. stocks by 10%. So far, the Trump administration's MAGA agenda seems to be one that could Make Ex-US Great Again (MEGA), despite the consensus entering the year being a continuation of American Exceptionalism.
The Bottom Line
A regime shift in U.S. policy towards fiscal austerity (potentially), trade wars and de-globalization - while U.S. stocks have high embedded expectations and multiples - is the most compelling catalyst that’s emerged over the last decade(+) for ex-U.S. stocks to chip away at a miserable stretch of underperformance.