{"id":6528,"date":"2020-10-12T13:38:42","date_gmt":"2020-10-12T18:38:42","guid":{"rendered":"https:\/\/schenkelberg.investments\/?p=6528"},"modified":"2020-10-12T13:38:54","modified_gmt":"2020-10-12T18:38:54","slug":"u-s-stocks-dominate","status":"publish","type":"post","link":"https:\/\/schenkelberg.investments\/?p=6528","title":{"rendered":"U.S. Stocks Dominate"},"content":{"rendered":"\n

Last quarter we discussed how the largest stocks in the Standard &\nPoor\u2019s 500 Index are dominating stock market returns, helping drive S&P 500\nreturns versus stocks in the rest of the index and other major indices. Apple\nand Amazon continued to outperform in the third quarter with total returns of\n27% and 14%, respectively. Microsoft stock was not as dominant, up 3.6% this\nquarter. <\/p>\n\n\n\n

The S&P 500 index continued to dominate other major indices in the\nquarter, driven by strong technology and consumer discretionary stocks. The\nRussell 2000, an index of small U.S. stocks, generated a total return of 6.6%\nversus 8.9% for the S&P 500. Underperformance for the year-to-date on\nSeptember 30, 2020, is a staggering 14.3%, with the S&P 500 total return at\n5.6% versus -8.7% for the Russell 2000 Index. <\/p>\n\n\n\n

The S&P 500 versus the MSCI All Country World ex-U.S. Index is also\nstaggering, with the S&P 500 outperforming the international index by over\n2% for the quarter and 10% year-to-date. The chart below illustrates the sharp\noutperformance of the S&P 500 Index versus the international index. Since\n2009, the S&P 500 has run up over 400%, while the international indexhas\nincreased less than 150%. The MSCI All Country World ex-U.S. Index is\nillustrated in the chart instead of the MSCI EAFE international index in the\ntable. It differs from the MSCI EAFE primarily due to the inclusion of emerging\nmarket securities, while the EAFE index does not have this exposure.<\/p>\n\n\n\n

International stocks enjoyed nice outperformance from 1997 through 2006.\nHowever, since that time we have seen U.S. stocks dominate. Several factors have\nbeen driving this outperformance. The value of the dollar can have a\nsignificant impact on stocks across the world. Additionally, the U.S. economy\nhas enjoyed a stronger recovery since the financial crisis than international\neconomies. <\/p>\n\n\n\n

It is worth taking note of this dichotomy. From a valuation perspective,\nthe 20-year average P\/E ratio of the S&P 500 is currently 15.4x versus\n13.5x for the international index. The current dividend yield for the S&P\n500 index is 1.8% versus 3.0% for the international index. International stocks\nhave historically paid higher dividends. However, from an overall valuation\nperspective, these differentials indicate a nice value opportunity with international\nstocks.<\/p>\n\n\n\n

The stock market tends to revert to the mean. In other words, a sharp\ndivergence like we\u2019ve seen in U.S. versus international stocks is typically\nunsustainable. The differential in U.S. price-to-earnings ratio versus\ninternational is the largest it has been in over 20 years. <\/p>\n\n\n\n

What could turn the tide and prompt international stocks to outperform U.S. stocks? Most likely we would need to see a significant drop in the U.S. dollar, evidence of a sustained economic recovery in developed international markets or significant headwinds for technology companies. This could be government regulation to raise taxes for these corporations, significant controls for user access or other unforeseen challenges that may be beyond their control.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n
\"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

Last quarter we discussed how the largest stocks in the Standard & Poor\u2019s 500 Index are dominating stock market returns, helping drive S&P 500 returns versus stocks in the rest of the index and other major indices. Apple and Amazon continued to outperform in the third quarter with total returns of 27% and 14%, respectively. […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[119,123],"tags":[],"class_list":["post-6528","post","type-post","status-publish","format-standard","hentry","category-market-commentary","category-market-performance"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7kXxe-1Hi","jetpack-related-posts":[{"id":6784,"url":"https:\/\/schenkelberg.investments\/?p=6784","url_meta":{"origin":6528,"position":0},"title":"US vs International","author":"J.J. Schenkelberg, CFA","date":"October 10, 2024","format":false,"excerpt":"IndexThird Quarter 2024Year\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 To-Date 2024S&P 5005.5%20.8%Dow Jones Industrial Average8.2%12.3%Russell 20009.2%10.0%\u00a0\u00a0MSCI All Country World Index ex-US7.7%13.8%\u00a0\u00a0Aggregate Bond5.2%4.6% Performance Source: Koyfin Price Return U.S. Versus International The S&P 500 Index, an index of large U.S. companies, posted a price return of 5.5% for the Third Quarter of 2024. Large U.S. stocks underperformed\u2026","rel":"","context":"Similar post","block_context":{"text":"Similar post","link":""},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6728,"url":"https:\/\/schenkelberg.investments\/?p=6728","url_meta":{"origin":6528,"position":1},"title":"Power at the Top \u2013 10 Stocks Drive S&P 500 Performance","author":"J.J. Schenkelberg, CFA","date":"January 5, 2024","format":false,"excerpt":"It is safe to look at your investment account statements again. 2023 was a very strong year for stocks. Especially when measured by the Standard and Poor\u2019s 500 Index(S&P 500). The S&P 500 Index had a total return of 26.2% for the full year. Other major indices had relatively strong\u2026","rel":"","context":"In "Financial Planning"","block_context":{"text":"Financial Planning","link":"https:\/\/schenkelberg.investments\/?cat=122"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2024\/01\/image-1.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":6765,"url":"https:\/\/schenkelberg.investments\/?p=6765","url_meta":{"origin":6528,"position":2},"title":"U.S. Versus International\/U.S. Sectors","author":"J.J. Schenkelberg, CFA","date":"July 10, 2024","format":false,"excerpt":"IndexSecond Quarter 2024Year\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 To-Date 2024S&P 5003.9%14.5%Dow Jones Industrial Average-1.7%3.8%Russell 2000-3.9%0.8%\u00a0\u00a0MSCI All Country World Index ex-US1.0%5.6%\u00a0\u00a0Aggregate Bond0.1%-0.6% Performance Source: Koyfin Price Return U.S. Versus International The S&P 500 Index, an index of large U.S. companies, posted a price return of 3.9% for the Second Quarter of 2024. Large U.S. stocks outperformed\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6571,"url":"https:\/\/schenkelberg.investments\/?p=6571","url_meta":{"origin":6528,"position":3},"title":"Market Update – Third Quarter 2021","author":"J.J. Schenkelberg, CFA","date":"October 15, 2021","format":false,"excerpt":"U.S. Versus International The S&P 500, an index of large U.S. companies, posted a total return of 0.6% for the Third Quarter of 2021. S&P 500 performance was driven by strength in select stocks with large weights in the index. U.S. stocks outperformed international again for the quarter as measured\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6769,"url":"https:\/\/schenkelberg.investments\/?p=6769","url_meta":{"origin":6528,"position":4},"title":"Power at the Top. 10 Stocks Continue to Drive S&P 500 Performance","author":"J.J. Schenkelberg, CFA","date":"July 10, 2024","format":false,"excerpt":"At the end of 2023 I highlighted the dominance of the top 10 stocks in the S&P 500. It is worth revisiting this topic. 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U.S. stocks outperformed international for the quarter as measured by the All Country World Index ex-U.S. stocks, a representation of international stocks outside the\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6528","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6528"}],"version-history":[{"count":1,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6528\/revisions"}],"predecessor-version":[{"id":6531,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6528\/revisions\/6531"}],"wp:attachment":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6528"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6528"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6528"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}