WSJ: S&P 500′s Rally Is Falling Behind the World

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TOJ
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WSJ: S&P 500′s Rally Is Falling Behind the World

Post by TOJ » Tue Mar 21, 2017 10:53 am

New article from the WSJ about how some global indices are beating the S&P 500. Obviously you can say anything you want by selecting certain years, but it's interesting nonetheless, particularly because of all the discussion about whether or not to hold international stocks.

http://blogs.wsj.com/moneybeat/2017/03/ ... the-world/

Fclevz
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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by Fclevz » Tue Mar 21, 2017 10:54 am

Viva la Total World Stock Index! :D

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by Vanguard Fan 1367 » Tue Mar 21, 2017 11:19 am

I sure have benefited from reading John Bogle. I have a Vanguard Global Fund with an expense ratio of about .5 percent which is high in my Boglehead mind. And the great Bogle seems to be more comfortable avoiding non-US investments. But I wanted to keep my Global Fund to avoid capital gains taxes.

Staying with the US Total Market or a small foreign investment in Fidelity's Total Stock Market FSTVX has made me happy as a clam. So I am not planning to increase my outside of the US holdings other than dividend reinvestment of the Global Fund.

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by iamlucky13 » Tue Mar 21, 2017 2:02 pm

The rest of the world's stocks have been lagging the S&P 500 for somewhere around a decade. I've generally assumed they'd get back in gear at some point and start making up for lost time.

Unfortunately, I'm still overweight in the US compared to my IPS. My ultimate plan is to tilt moderately to small and value, but I've been spending too much time researching funds and challenging that strategy to be sure I'm content with the risks. I knew what I should do is start simple and get my target percent in total international, THEN figure out my tilt, but I didn't execute.

I guess that makes this article a reminder to quit stalling.

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by kolea » Tue Mar 21, 2017 2:37 pm

Can you give a synopsis? The article is behind a pay-wall.
Kolea (pron. ko-lay-uh). Golden plover.

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by iamlucky13 » Tue Mar 21, 2017 3:03 pm

kolea wrote:Can you give a synopsis? The article is behind a pay-wall.
Just from the teaser that they let us non-subscribers see, I figured I'd read enough when I saw the phrase, "on pace to beat the S&P 500 for the first time since 2012."

So short term trends are showing even shorter term variation. Yawn.

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by asif408 » Tue Mar 21, 2017 3:18 pm

From 2010-2016, the S&P had an approximately 13% CAGR, while international developed and emerging have returned about 4% & 0.3% CAGR, respectively, over that same time period. If you look at 2008-2016, international developed and emerging have had negative CAGRs, while US had a 7% CAGR. So, yes, international has had a good 5-8 years of underperformance and nearly negative returns. History tells us that these bouts of outperformance between US & foreign come and go. The US has had a good run. The pendulum appears to have swung starting early last year, as nearly all of the foreign underperformers to the S&P for the last several years have outperformed it since early last year. Or maybe not. Who knows?.......

I'm interested when we'll see the first post here, maybe in a few years, for 100% international or emerging markets stocks like we've been seeing in the last several years for 100% US stocks. Then I'll know the pendulum is getting ready to swing back. The last one I saw asking if 100% emerging markets was a good idea was back in 2011, right before emerging markets began tanking, and which was a good time to sell emerging markets after it's stellar performance over the 2002 to 2011 time frame.

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by NiceUnparticularMan » Tue Mar 21, 2017 8:38 pm

It is indeed a comfort having a portfolio where you don't have to care at all about such things.

Of course it is possible people with little or no international exposure will be perfectly fine in the long run--if they ride it out. That's always the caveat, however: you have to be disciplined enough not to change your plan whenever the top-performing asset classes change, sometimes for long periods at a time.

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by WallStreetPhysician » Tue Mar 21, 2017 8:46 pm

TOJ wrote:New article from the WSJ about how some global indices are beating the S&P 500. Obviously you can say anything you want by selecting certain years, but it's interesting nonetheless, particularly because of all the discussion about whether or not to hold international stocks.

http://blogs.wsj.com/moneybeat/2017/03/ ... the-world/
I fully expect the next "How much international stocks do you have" thread on Bogleheads to be full of responses from people who are overweight international stocks...

-WallStreetPhysician

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by knpstr » Tue Mar 21, 2017 8:52 pm

So, should I start picking funds that show some recent out performance?
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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by nisiprius » Tue Mar 21, 2017 9:16 pm

I found the headline puzzling because I hadn't noticed anything like that, but I hadn't been paying attention. On quickly checking, I found that if we look at the last 12 months, the Vanguard 500 Index Fund, VFINX, has vastly outperformed the Vanguard European Index Fund, VEURX. It was slightly behind Vanguard Emerging Markets Index, VEIEX and slightly ahead of Vanguard Pacific Index, VPACX. Since the European markets, cap-weighted, form a very large part of the international stock market, it is not surprising that the 500 Index fund beat both the Vanguard Total International Stock Index Fund and the Vanguard Total World Stock Index Fund.

It turns out article is only talking about a few months: year-to-date and/or "since the election."

What's weird is that for some reason the article's chart indicate that "all data before 2017 is total return, including dividends," meaning apparently that the data for 2017 isn't. I can't think why not. I don't think it makes any different to speak of--stock funds aren't going to gather a lot of dividends in three months--but it still seems unreasonably sloppy.

Anyway, it is what it is. I don't think it makes sense to compare something as short as a "rally" with the rest of the world--there's no reason why the whole worlds' stock markets should experience "rallies" in sync, is there?

Another indication of sloppiness is "While U.S. equities have trounced their global pears throughout the recovery..." Of course he meant to write "global piers." [Yes, that was a joke.]
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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by Nick341981 » Wed Mar 22, 2017 1:36 am

asif408 wrote: History tells us that these bouts of outperformance between US & foreign come and go. The US has had a good run.
Too bad nobody told Japan about this :oops:

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by triceratop » Wed Mar 22, 2017 1:48 am

nisiprius wrote:I found the headline puzzling because I hadn't noticed anything like that, but I hadn't been paying attention. On quickly checking, I found that if we look at the last 12 months, the Vanguard 500 Index Fund, VFINX, has vastly outperformed the Vanguard European Index Fund, VEURX. It was slightly behind Vanguard Emerging Markets Index, VEIEX and slightly ahead of Vanguard Pacific Index, VPACX. Since the European markets, cap-weighted, form a very large part of the international stock market, it is not surprising that the 500 Index fund beat both the Vanguard Total International Stock Index Fund and the Vanguard Total World Stock Index Fund.

It turns out article is only talking about a few months: year-to-date and/or "since the election."

What's weird is that for some reason the article's chart indicate that "all data before 2017 is total return, including dividends," meaning apparently that the data for 2017 isn't. I can't think why not. I don't think it makes any different to speak of--stock funds aren't going to gather a lot of dividends in three months--but it still seems unreasonably sloppy.

Anyway, it is what it is. I don't think it makes sense to compare something as short as a "rally" with the rest of the world--there's no reason why the whole worlds' stock markets should experience "rallies" in sync, is there?

Another indication of sloppiness is "While U.S. equities have trounced their global pears throughout the recovery..." Of course he meant to write "global piers." [Yes, that was a joke.]
Ha! you noticed that too!

All Vanguard ETF mentioned in the article have a price return YTD that is equal to their total return YTD. Notice they weren't talking about index price return (in which case there would be a bona fide difference between price and total return across any time period this long), but the funds instead.

Of course, the preceding paragraph will be false as of tomorrow, 3/22, as VWO goes ex-dividend. :)

Anyway, your point is a good one! Which was the only ETF that was not a Vanguard ETF? State Street's, the SPY! It went ex-dividend on 3/17, according to NASDAQ. Why didn't they use all Vanguard funds? Well that's unknowable, but what is known is that VOO, the Vanguard S&P500 ETF doesn't go ex-dividend until 3/22, as well. If I were a cynic, I would think....[ fake news!]

Clever writing to amplify their point, but it's a shame because the article would have still held up if using total return for SPY as well.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by petulant » Wed Mar 22, 2017 8:39 am

I would suggest people take this article with a huge grain of salt. With US interest rates rising and ECB and Japanese rates steady and low, US currency should strengthen and remain strong. Foreign stock returns for US investors will continue to lag if that's the case.

The better option is to stay the course. Keep investing based on your policy, and don't change your policy based on short-term changes or prognostications.

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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by stemikger » Wed Mar 22, 2017 8:47 am

You can't bet against America and win ~ Warren Buffett

https://www.youtube.com/watch?v=hX_AmdTwmlk
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Re: WSJ: S&P 500′s Rally Is Falling Behind the World

Post by Taylor Larimore » Wed Mar 22, 2017 8:55 am

Bogleheads:

The gentleman who wrote the article is Chris Dieterich, “Market Maniac” reporter for the Wall Street Journal.

http://www.cision.com/us/2016/09/changes-at-wsj-2/

Best wishes.
Taylor
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