Why a Global Investment Perspective is essential.
Global Diversification = Less Risk
The Decline of the US Dollar
Global Growth Opportunities
In the good old days, investing primarily in the United States made sense. The U.S. produced more than half the world’s output, the U.S. dollar was king, our manufacturing base vibrant and, for the most part, the rest of the world was behind. To use such an approach today would be a mistake.
- The United States accounts for only 25% of global output
- The dollar has fallen against the Euro by more than 40% during the past two years,
- More than 75% of all publicly traded companies are located outside the U.S.
- Growth rates in other countries can be two to three times higher than the U.S.
In the last ten years, the U.S. has never been the world’s best performing stock market.
- In fact, it has never ranked higher than fourth place.
- During the 1980’s alone, the Europe, and Far East Index grew 27% per year compared to 16% for the S&P 500 Index.
- During the 1990’s, the slowdown in Japan and the U.S. technology boom left many investors thinking they did not need international exposure but than the S&P 500 dropped 44% in two years.
- During the past three years, while the S&P 500 has been flat, Brazil is up 49%, Austria up 43%, Mexico up 42%, China up 30%, Sweden and Spain up 28%, and Australia and Canada up 27%.
Here’s a shocker. During the past 25 years, a blended portfolio of 60% U.S. stocks and 40% international stocks was less volatile than a S&P 500 index fund.
Meanwhile, the U.S. has more workers in state and local government than in manufacturing, the last monthly merchandise trade surplus occurred during the Ford Administration and our budget and trade deficits together will exceed $1 trillion this year. America’s total debt now exceeds $31 trillion, more than three times our GDP.
This means the U.S. dollar will have to continue to decline in value.
Let’s be blunt, even if you believe as I do that the United States is the best country in the history of the world, it makes about as much sense to invest in only one country as it does to invest in only one company or one industry.