After over a decade of outperformance, are global investors turning away from the US?
As already noted, Bank of America’s latest fund manager survey shows investors rushed out of the US last month, following a record monthly shift in sentiment. Investor reticence towards the US can be seen in the performance tables: over a recent 50-trading-day period, non-US markets outperformed the US by 14 percentage points, the widest margin since 2009.
Despite last year’s rise in the US dollar, the US also underperformed in 2022. Measured in local currency, notes Schwab’s Jeffrey Kleintop, the outperformance was double-digit and the widest since 2005.
Schwab reckons US underperformance won’t end any time soon. US indices have trounced their international counterparts over the last decade, with 2022 being their first annual underperformance in that period. Market cycles “tend to last years, not months”, with non-US markets outperforming strongly in the 1980s and 2000s, and US stocks taking the baton in the 1990s and 2010s.
Are we now in a new cycle? Will the leader become the laggard? Probably, says Schwab, which expects “enduring and sizeable” market shifts favouring non-US stocks.