International Stocks return will be superior to US
International Stocks return will be superior to US
Vanguard came out with its prediction of future returns and is stating that international stocks will return more than US stocks in the future. How is it possible given the following macro issues:
1) Interest rates - Europe is negative trending higher, Developed world x EU is trending higher. Neither of these regions returned superior to the US with negative interest rates. How can they do better than in the past with interest rates that are going higher.
2) US currency vs Currencies of developed countries - US interest rates are trending higher strengthening USD - I am assuming this will make any earnings brought from the developed countries to the US shareholder be less. This trend is not likely to reverse until USD weakens beyond what it was when US interest rates were at zero.
3) If US interest rates go in reverse due to a recession, 1 and 2 should have less of a negative impact on the developed countries improving their earning s, but the US is typically their largest trading partner and will contribute negatively to that same bottom line.
Does superior return mean its in nominal terms and should not be translated to USD for US shareholders?
I am not arguing the diversification of international but only return expectations.
I am also asking to exclude emerging markets from this conversation as it is a bit of a red hearing.
1) Interest rates - Europe is negative trending higher, Developed world x EU is trending higher. Neither of these regions returned superior to the US with negative interest rates. How can they do better than in the past with interest rates that are going higher.
2) US currency vs Currencies of developed countries - US interest rates are trending higher strengthening USD - I am assuming this will make any earnings brought from the developed countries to the US shareholder be less. This trend is not likely to reverse until USD weakens beyond what it was when US interest rates were at zero.
3) If US interest rates go in reverse due to a recession, 1 and 2 should have less of a negative impact on the developed countries improving their earning s, but the US is typically their largest trading partner and will contribute negatively to that same bottom line.
Does superior return mean its in nominal terms and should not be translated to USD for US shareholders?
I am not arguing the diversification of international but only return expectations.
I am also asking to exclude emerging markets from this conversation as it is a bit of a red hearing.
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Re: International Stocks return will be superior to US
Don't believe everything you read. Vanguard has been predicting international outperformance for nearly a decade. At some point in the future, it will outperform for a period of time ... and underperform for a period of time. Set your AA and stay the course.
Re: International Stocks return will be superior to US
Link?
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Re: International Stocks return will be superior to US
Also this:
https://advisors.vanguard.com/insights/ ... lsrc=aw.ds
it seems that the main argument is that the return were so poor before that they must be better in the future...
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Re: International Stocks return will be superior to US
Let’s see, how many times have they made this prediction?Kookaburra wrote: ↑Wed Jan 25, 2023 11:00 am Don't believe everything you read. Vanguard has been predicting international outperformance for nearly a decade. At some point in the future, it will outperform for a period of time ... and underperform for a period of time. Set your AA and stay the course.
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* |
FIRE'd July 2023
Re: International Stocks return will be superior to US
Thanks. While I think there's a decent chance ex-US will perform well, forecasts are at best educated guesses. That's why I stay globally diversified. Also, a year ago forecasts were very different. A year from now they might also be very different. Globally diversified investors will probably be fine either way.erishera wrote: ↑Wed Jan 25, 2023 11:15 amAlso this:
https://advisors.vanguard.com/insights/ ... lsrc=aw.ds
it seems that the main argument is that the return were so poor before that they must be better in the future...
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Re: International Stocks return will be superior to US
So one important thing to keep in mind is that their model outputs are probabilistic. In this case, the December report . . .
https://advisors.vanguard.com/iwe/pdf/ISGVEMO.pdf
. . . had the 10-year 5%/95% range for ex-US equities as 2.2 to 14.9, and US equities as -1.3 to 12.9. So while ex-US might be a slightly better bet to outperform US given their model, there is still going to be a large possibility it will go the other way. Possibly by a lot.
I note this is part of the answer to people who say these models are useless because sometimes they don't pick the right winners. With probabilistic models, you have to be careful when evaluating them, and really to do it properly you have to keep track of how closely observed frequencies match their probabilistic outputs.
A second important thing to keep in mind is in forward-looking models, valuations tend to matter. Meaning just because asset A has higher expected earnings than asset B doesn't mean asset A has higher expected returns than asset B. Instead, if asset A is also priced higher than asset B, it could have the same or indeed lower expected returns despite higher expected earnings.
A similar issue applies to dividends. Dividends are an important component of stock returns and so even if asset A pays as much or more as asset B in dividends, if asset A is priced higher it could have lower expected returns.
Finally, on currencies, first, 10 years is a really long time! And what they say is this:
OK, so all that helps explain the following bit of analysis:
OK, so, conditionally, if valuations converge a bit, and the dollar weakens a bit, then it does seem like a good bet ex-US will outpeform US.
If the dollar doesn't weaken or actually strengthens, then much less so. If the dollar strengthens again and valuations diverge further, then it could be better for US again.
Their model doesn't rule that out. It is just outputting a probability distribution that makes it a bit more likely ex-US outperform US.
https://advisors.vanguard.com/iwe/pdf/ISGVEMO.pdf
. . . had the 10-year 5%/95% range for ex-US equities as 2.2 to 14.9, and US equities as -1.3 to 12.9. So while ex-US might be a slightly better bet to outperform US given their model, there is still going to be a large possibility it will go the other way. Possibly by a lot.
I note this is part of the answer to people who say these models are useless because sometimes they don't pick the right winners. With probabilistic models, you have to be careful when evaluating them, and really to do it properly you have to keep track of how closely observed frequencies match their probabilistic outputs.
A second important thing to keep in mind is in forward-looking models, valuations tend to matter. Meaning just because asset A has higher expected earnings than asset B doesn't mean asset A has higher expected returns than asset B. Instead, if asset A is also priced higher than asset B, it could have the same or indeed lower expected returns despite higher expected earnings.
A similar issue applies to dividends. Dividends are an important component of stock returns and so even if asset A pays as much or more as asset B in dividends, if asset A is priced higher it could have lower expected returns.
Finally, on currencies, first, 10 years is a really long time! And what they say is this:
Note 14 then says:Currency returns are notoriously difficult to forecast over short investment horizons, and many factors can cause them to deviate from their fundamentals.14 However, over a sufficiently long investment horizon, we expect global inflation and policy convergence to lead to exchange-rate normalization.
So that's a lot of uncertainty about currencies!Because all currencies are relative pairs, it is possible that the headwinds the U.S. dollar faces will be even stronger for international currencies, which would cause the U.S. dollar to strengthen, all else equal.
OK, so all that helps explain the following bit of analysis:
If you then look at Figure 11-13, their central estimate is that earnings growth will continue to favor US stocks, but valuation changes, dividend yields, and forex returns will now favor ex-US returns. However, any of that could potentially be wrong, and cumulatively that creates a wide range of outcomes, in many of which US would outperform ex-US instead.U.S. equities have outperformed their global peers by a very wide margin over the last decade. On a cumulative return basis, a portfolio of U.S. stocks bought in 2012 is worth twice as much as a portfolio of international stocks bought in the same period. Although many reasons have been cited for this outperformance—stronger U.S. growth, a less uncertain economic environment, and the sector composition of the U.S. market—our framework focuses on the durable sources of outperformance. To that end, we believe that the valuation-based expansion in U.S. equities is sowing the seeds for lower returns in the decade ahead. Our outlook is positive for international equities despite our view that the U.S. will have higher earnings growth, though we may need to see a weaker dollar for international outperformance to be sustained.
Figure II-13 shows our outlook for U.S. and international equities and a breakdown of the expected total return difference for the decade ahead. Although the valuations gap has narrowed since last year, we expect more favorable international valuations, higher dividend payout ratios, and a weaker dollar to drive international outperformance.
OK, so, conditionally, if valuations converge a bit, and the dollar weakens a bit, then it does seem like a good bet ex-US will outpeform US.
If the dollar doesn't weaken or actually strengthens, then much less so. If the dollar strengthens again and valuations diverge further, then it could be better for US again.
Their model doesn't rule that out. It is just outputting a probability distribution that makes it a bit more likely ex-US outperform US.
Re: International Stocks return will be superior to US
While I love Vanguard, their continual touting of International funds and ETFs versus domestic strikes me of the broken clock analogy. Some of it might also be due to international choices generally having a higher fee structure than domestic that benefits Vanguard directly.
Re: International Stocks return will be superior to US
US equities have outperformed ex-US for an extended period of time.
Some Bogleheads believe in "reversion to the mean" and expect a future period where ex-US will outperform. Other believe that the US has an intrinsic advantage over ex-US and will continue to outperform for the foreseeable future. As a result Bogleheads will recommend anything between 0% ex-US to 60% or more ex-US as "reasonable."
Since I really don't know who is correct, I am hedging my bets by owning ex-US, but at less than market weighting (35% currently). But I'm not sure there is a "correct" answer here.
Some Bogleheads believe in "reversion to the mean" and expect a future period where ex-US will outperform. Other believe that the US has an intrinsic advantage over ex-US and will continue to outperform for the foreseeable future. As a result Bogleheads will recommend anything between 0% ex-US to 60% or more ex-US as "reasonable."
Since I really don't know who is correct, I am hedging my bets by owning ex-US, but at less than market weighting (35% currently). But I'm not sure there is a "correct" answer here.
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Re: International Stocks return will be superior to US
It’s not a broken clock when the historical record shows a cyclical nature to exUS outperformanceychuck46 wrote: ↑Wed Jan 25, 2023 12:26 pm While I love Vanguard, their continual touting of International funds and ETFs versus domestic strikes me of the broken clock analogy. Some of it might also be due to international choices generally having a higher fee structure than domestic that benefits Vanguard directly.
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Re: International Stocks return will be superior to US
I hold at least 50% internationally. I will stick with this regardless of what Vanguard says or does.
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Re: International Stocks return will be superior to US
Speaking just for myself, I would not endorse a "reversion to the mean" theory. But I do think it is correct that to the extent US outperformance in recent years was dependent on valuations divergence (and related sector weighting issues) and currency effects, it is unlikely such factors would result in overperformance indefinitely.
But questions like whether valuations will converge further (they converged a bit recently), diverge further, or stay about the same in the next 10 years? That's not really possible to predict with any sort of certainty. Vanguard thinks a further valuation convergence is more likely, and that may well be true, but "more likely" is not certain.
Similarly, whether the USD will weaken, strengthen further, or stay about the same in the next 10 years is also to me something not possible to predict with any sort of certainty.
Not to be overly argumentative, but again US companies could have an intrinsic advantage in terms of things like growing earnings without that meaning US stocks will provide higher returns.Other believe that the US has an intrinsic advantage over ex-US and will continue to outperform for the foreseeable future.
Indeed, assuming such advantages will result in higher returns to stock investors really only makes sense if you think these advantages are known to you, but not other investors.
So you'll see a lot of people in these discussions talk about the possible advantages enjoyed by US companies.
You will see few, if any, of those people explain why what they are talking about is unknown to other stock investors.
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Re: International Stocks return will be superior to US
I really see no need to be conspiratorial.ychuck46 wrote: ↑Wed Jan 25, 2023 12:26 pm While I love Vanguard, their continual touting of International funds and ETFs versus domestic strikes me of the broken clock analogy. Some of it might also be due to international choices generally having a higher fee structure than domestic that benefits Vanguard directly.
Without going into all the proprietary details, Vanguard provides pretty detailed explanations of how their model works and why it outputs the central estimates that it does. The reason why the central estimates have been off over (most) of the recent period is that in this period, US valuations continued to diverge in a way that the central estimate did not reflect, and the USD also strengthened in a way that the central estimate did not reflect.
But to say the clock is broken is basically to say that what happened in the recent period shows that forever in the future, valuations will keep diverging and the USD will keep gaining in relative strength.
If you think seriously about both those propositions, neither really seems plausible. For sure, valuation trends can last long times and hit unexpected new highs, but they can't really continue forever. And there are all sorts of policy reasons why those in charge of US monetary policy would not want the USD to keep strengthening forever.
So you don't need a conspiracy to explain why someone would think the music has to stop playing . . . eventually.
But as always with these things, knowing WHEN the music will stop playing is very, very hard to get right.
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Re: International Stocks return will be superior to US
At least in the near term:
The global equity markets have been outperforming the S&P 500 index since mid-October, about the time when the U.S. Consumer Price Index (CPI) confirmed the peak inflation story, which also unleashed a global retreat from the safety of the U.S. dollar.
https://www.marketwatch.com/story/inter ... 1674657827We are least preferred in the U.S. over the near term, given the relatively expensive valuation of U.S. stocks and the market’s heavy weighting toward the tech sector, which is particularly vulnerable to higher interest rates and slower economic growth.
Re: International Stocks return will be superior to US
No offense, but your "macro issues" seem to be largely your take on how you imagine the world works, while I would hope the Vanguard PHDs are building models based on actual empirical data.
Re: International Stocks return will be superior to US
The "mean" is US outperformance over the long run - the US outperformed significantly over the last 30, 50, 120 years. Not sure how "reversion to the mean" means what some people think it means. Even if you ignore the last decade (and why would you?), the US still outperformed significantly during the century up to a decade ago. Sure, there were periods of equal performance, and ex-US outperformance, but the "mean" has been US outperformance.jrbdmb wrote: ↑Wed Jan 25, 2023 12:57 pm US equities have outperformed ex-US for an extended period of time.
Some Bogleheads believe in "reversion to the mean" and expect a future period where ex-US will outperform. Other believe that the US has an intrinsic advantage over ex-US and will continue to outperform for the foreseeable future. As a result Bogleheads will recommend anything between 0% ex-US to 60% or more ex-US as "reasonable."
Since I really don't know who is correct, I am hedging my bets by owning ex-US, but at less than market weighting (35% currently). But I'm not sure there is a "correct" answer here.
Re: International Stocks return will be superior to US
In March 2010, Vanguard predictions for stocks and bonds over the next decade would be 6% stocks and 2% bonds
https://retirementincomejournal.com/art ... e-returns/
https://retirementincomejournal.com/art ... e-returns/
Re: International Stocks return will be superior to US
Ignore what Vanguard, and anyone else, predicts or forecasts about future market performance. One could be just as accurate rolling a pair of dice or tossing a dart at a dartboard. Nobody knows.
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Re: International Stocks return will be superior to US
So, US market cap at 99% by 2060?
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Re: International Stocks return will be superior to US
Unfortunately, though, we have to put our long-term savings somewhere.
And as is often the case when dealing with long-term planning in a very unpredictable world, the best answer may not be so much trying to guess the answer that will be right in hindsight, but rather the answer that will definitely not be right, but may be sufficient over a wide range of possible right answers.
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Re: International Stocks return will be superior to US
I assume at some point US companies will start successfully demanding their shareholders pay THEM dividends.
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Re: International Stocks return will be superior to US
From 1950-2010 performance was equalvisualguy wrote: ↑Wed Jan 25, 2023 2:13 pmThe "mean" is US outperformance over the long run - the US outperformed significantly over the last 30, 50, 120 years. Not sure how "reversion to the mean" means what some people think it means. Even if you ignore the last decade (and why would you?), the US still outperformed significantly during the century up to a decade ago. Sure, there were periods of equal performance, and ex-US outperformance, but the "mean" has been US outperformance.jrbdmb wrote: ↑Wed Jan 25, 2023 12:57 pm US equities have outperformed ex-US for an extended period of time.
Some Bogleheads believe in "reversion to the mean" and expect a future period where ex-US will outperform. Other believe that the US has an intrinsic advantage over ex-US and will continue to outperform for the foreseeable future. As a result Bogleheads will recommend anything between 0% ex-US to 60% or more ex-US as "reasonable."
Since I really don't know who is correct, I am hedging my bets by owning ex-US, but at less than market weighting (35% currently). But I'm not sure there is a "correct" answer here.
You don’t have to ignore the last 10 years, but it shouldn’t be used as justification for perpetual outperformance
US is not even the highest performing market; EM markets have done better, in addition to other western countries like Australia
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Re: International Stocks return will be superior to US
Jack Bogle had the answer to unpredictability. Invest in low-cost, well-diversified, index funds and hold them forever. Don't look for the needle in the haystack, buy the haystack! The market has always recovered from dips, dives and crashes. A buy and hold approach consistently beats trading on trends over the long-term.NiceUnparticularMan wrote: ↑Wed Jan 25, 2023 2:34 pmUnfortunately, though, we have to put our long-term savings somewhere.
And as is often the case when dealing with long-term planning in a very unpredictable world, the best answer may not be so much trying to guess the answer that will be right in hindsight, but rather the answer that will definitely not be right, but may be sufficient over a wide range of possible right answers.
Moving your investments around trying to chase returns or trying to get ahead of what the market will do tomorrow, next month or next year is a fool's errand. Instead, select an asset allocation that matches your willingness, need and ability to take risk and stick with it for the long haul. What anyone forecasts is of no benefit to the average investor as they make such decisions.
Those are the keys to investment success!
Re: International Stocks return will be superior to US
I tend to agree. It's a really complex issue and I've listened to many different perspectives. I tend to think being globally diversified reduces risk, but there are also higher expenses and taxes than with domestic investments.jrbdmb wrote: ↑Wed Jan 25, 2023 12:57 pm US equities have outperformed ex-US for an extended period of time.
Some Bogleheads believe in "reversion to the mean" and expect a future period where ex-US will outperform. Other believe that the US has an intrinsic advantage over ex-US and will continue to outperform for the foreseeable future. As a result Bogleheads will recommend anything between 0% ex-US to 60% or more ex-US as "reasonable."
Since I really don't know who is correct, I am hedging my bets by owning ex-US, but at less than market weighting (35% currently). But I'm not sure there is a "correct" answer here.
There's a Vanguard paper summarizing global diversification and volatility reduction that's been linked many times in these threads. In terms of volatility reduction, they've found a 25 to 40% ex-US allocation is optimal. There's a very little difference in volatility within this range, so I think anywhere within it seems pretty reasonable to me. All things considered I understand why some people would be inclined to go toward the low end of that range.
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Re: International Stocks return will be superior to US
Just as an FYI:
last 3 months VTI up about 4%, VXUS up about 19%
Not saying it will last, but it seems to go contrary to your thesis that ex-us is doomed to fail
last 3 months VTI up about 4%, VXUS up about 19%
Not saying it will last, but it seems to go contrary to your thesis that ex-us is doomed to fail
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Re: International Stocks return will be superior to US
It has? That is great, since I have more international stocks than US stocks.
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Re: International Stocks return will be superior to US
Yeah, basically what happened in 2010 was investors at the time didn't know that US stocks were going to more or less double their valuations over the next 10 years.Nathan Drake wrote: ↑Wed Jan 25, 2023 2:47 pm You don’t have to ignore the last 10 years, but it shouldn’t be used as justification for perpetual outperformance
Because presumably if they had known, then the valuations would already have been high, and wouldn't have doubled.
I note too we have seen all this before. As in, US stocks have thrown not just one valuation party, but several over the years:
They are sure fun while they last, but so far none of them have lasted forever. And the hangovers can be a doozy.
But maybe this will be the first US stock valuation party to just never end . . . .
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Re: International Stocks return will be superior to US
This is quite good advice when it comes to trying to maximize risk-adjusted stock returns by performance chasing. The "haystack" these days is a low-cost, well-diversified, global index fund, so you can easily implement that advice.galawdawg wrote: ↑Wed Jan 25, 2023 2:56 pm Jack Bogle had the answer to unpredictability. Invest in low-cost, well-diversified, index funds and hold them forever. Don't look for the needle in the haystack, buy the haystack! A buy and hold approach consistently beats trading on trends over the long-term.
Moving your investments around trying to chase returns or trying to get ahead of what the market will do tomorrow, next month or next year is a fool's errand.
This is the tricky bit.Instead, select an asset allocation that matches your willingness, need and ability to take risk
I'd suggest "willingness to take risk" is actually a bad factor to consider as it is basically assuming behavioral issues like Myopic Loss Aversion should be a factor in investment decisions. Instead, you should be trying to think long-term about risk, and insulate your decisions from adverse behavioral things like MLA, not give into them.
And then assessing your "need and ability to take risk" in any practical way depends on what you think about various assets going forward.
So it would be easy if everyone could ignore risk, just put all their savings into a global stock index fund, and move on with their lives.
But because of risk, we rationally want to do something else with our savings, at least at some point. But exactly what else is the hard part of all this.
Re: International Stocks return will be superior to US
I am not sue I buy the deference to authority argument, PHD or not.
My take is hardly made up. In fact, that is why am asking this question. If you would like I could refer to Warren Buffet on it... I think, he among others said :when interest rates go up, asset valuations go down. So my question is then if Europe (largest part of Dev WorldXUS) underperformed with negative rates, how can they all of a sudden outperform with increasing rates. The second part of the question is about how repatriation of earnings impacts the return realized by US owners given that USD is getting stronger as long as US interest rates are getting higher. Given both of these, what am I missing in the empirical data that has such weight that it would overcome these two?
Note that I am not arguing the diversification aspect nor the reversion argument but simply trying to see what economic tail wind is used to make this forecast as it is not obvious.
Re: International Stocks return will be superior to US
That existed:NiceUnparticularMan wrote: ↑Wed Jan 25, 2023 2:35 pmI assume at some point US companies will start successfully demanding their shareholders pay THEM dividends.
https://www.investopedia.com/terms/a/as ... estock.asp
Re: International Stocks return will be superior to US
1. Earnings don't necessarily depend on interest rates. They kind of do sometimes for the large growth type of companies that currently dominate the US stock market interest. But those sorts of companies don't exactly dominate the international stock market index.
2. USD has been weakening for the last 4 months.
3. Earnings aren't dependent on currency exchange rates, although they can be affected by them, depending on where a company does most of its business.
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Re: International Stocks return will be superior to US
Yes recency bias is rampant on here. If anything, targeting what's done poorly recently makes more sense, which includes ex-US. Incidentally, part of the rationale for factor slants is systematically targeting what's done poorly recently.
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Re: International Stocks return will be superior to US
That’s a fantastic chart, thanks for postingNiceUnparticularMan wrote: ↑Wed Jan 25, 2023 3:01 pmYeah, basically what happened in 2010 was investors at the time didn't know that US stocks were going to more or less double their valuations over the next 10 years.Nathan Drake wrote: ↑Wed Jan 25, 2023 2:47 pm You don’t have to ignore the last 10 years, but it shouldn’t be used as justification for perpetual outperformance
Because presumably if they had known, then the valuations would already have been high, and wouldn't have doubled.
I note too we have seen all this before. As in, US stocks have thrown not just one valuation party, but several over the years:
They are sure fun while they last, but so far none of them have lasted forever. And the hangovers can be a doozy.
But maybe this will be the first US stock valuation party to just never end . . . .
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Re: International Stocks return will be superior to US
1. Both interest rates and inflation are also country specific. So, it is not entirely the case that growth companies in one country being weak means it is the case for other countries.Beensabu wrote: ↑Wed Jan 25, 2023 3:26 pm1. Earnings don't necessarily depend on interest rates. They kind of do sometimes for the large growth type of companies that currently dominate the US stock market interest. But those sorts of companies don't exactly dominate the international stock market index.
2. USD has been weakening for the last 4 months.
3. Earnings aren't dependent on currency exchange rates, although they can be affected by them, depending on where a company does most of its business.
2. If one looks at the prospective of other countries and their currencies, international stocks have had a major gain. Because I do not want to be playing the guessing game of which country's currency will valuate better, I buy a lot of international stocks and try to avoid devaluation (not just inflation) of my portfolio.
3. Right; this is why dividends can change widely from international funds. All of the bias that US investors have about the predictability of stock dividends apply elsewhere, so we can expect this to be the case usually (some countries have different laws regardless dividends, so that adds yet another layer of complexity).
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Re: International Stocks return will be superior to US
To me it just feels more comfortable to own a mixed fund like AVGE and not worry about betting on one side or the other. Maybe VTI will outperform, maybe it won't - and maybe it won't matter because either will be good enough for my purposes. It's not as if VTI will return 10% a year while AVGE loses money. If U.S. does great, then AVGE has a big chunk of that.
There is no point to the endless debates because all that tells me is that a lot of smart people, which we certainly have here, can have very different viewpoints and never agree.
There is no point to the endless debates because all that tells me is that a lot of smart people, which we certainly have here, can have very different viewpoints and never agree.
Re: International Stocks return will be superior to US
Vanguard has been predicting superior International returns for over a decade now.
Eventually they'll be right, but their past predictive performance should demonstrate that these predictions shouldn't be taken as "actionable" information.
Eventually they'll be right, but their past predictive performance should demonstrate that these predictions shouldn't be taken as "actionable" information.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: International Stocks return will be superior to US
Political risk is pretty much impossible to quantify.
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Re: International Stocks return will be superior to US
The best way to see if US or Global-Ex is performing better is a relative strength chart.
https://stockcharts.com/acp/?s=VXUS%3AVTI
Make sure to click on weekly. RSI and MACD are very strong for Global-ex-US.
Also, Schwab has a relative strength feature for non-Schwab customers that has 10 years of data.
https://www.schwab.com/research/etfs/quotes/chart/vxus
You will have to add VTI to Comparisons -->Compare Relative Strength and then expand the chart to 10 year weekly.
https://stockcharts.com/acp/?s=VXUS%3AVTI
Make sure to click on weekly. RSI and MACD are very strong for Global-ex-US.
Also, Schwab has a relative strength feature for non-Schwab customers that has 10 years of data.
https://www.schwab.com/research/etfs/quotes/chart/vxus
You will have to add VTI to Comparisons -->Compare Relative Strength and then expand the chart to 10 year weekly.
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Re: International Stocks return will be superior to US
As a US - only investor, I find this very reassuring, considering the source. I assume Vanguards experts probably believe that buccaneering Global Britain, finally liberated from the shackles of the EU through Brexit, will pull up global stocks.
Re: International Stocks return will be superior to US
Who they think will pull up ex-US stocks beats me, and has been a mystery to me for years now. What I am interested in is how these experts invest their own money rather than how they compose target date funds, or what they write in some reports...
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Re: International Stocks return will be superior to US
Europe has had better earnings growth than US recently. And of course, exUS has had 20% returns the past few months vs 5% for S&P
ExUS also outperformed last year
https://youtu.be/PWK2GA9rsck
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: International Stocks return will be superior to US
Now we care about a few months or a year? That happened many times before, and it has still been awful in the long run.Nathan Drake wrote: ↑Thu Jan 26, 2023 12:02 amEurope has had better earnings growth than US recently. And of course, exUS has had 20% returns the past few months vs 5% for S&P
ExUS also outperformed last year
https://youtu.be/PWK2GA9rsck
Re: International Stocks return will be superior to US
Its important to disentangle the effects of currency on Ex US Stocks Return from the Return of the Stocks themselves. Recently USD weakened so returns of Ex-US stocks got a boost from it. Unless you expect this to continue for some reason there is no reason to state this like its a valuable information.
Related to this Currency Hedging Ex-US seems to be attractive right now for US Investor as there is a Return to Hedging coming from the Positive Interest Rate Diffrential of US relative to Europe/Japan. Also many people expect Dollar to continue weakening so it will probably appreciate from now. This is why I am confused why in this forum many invest in unhedged Ex-US funds
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Re: International Stocks return will be superior to US
I have read the book and digested and agree with all or most of the concepts. However, what i can't get my head around or what I don't think makes sense is this statement of a buy and hold "consistently" beats trading on trends over the long-term. Correct me me i'm wrong, but i don't think those are the exact words in the book. It is difficult, sure. And unlikely given the skill required. However, a lot of the reasoning Bogle discusses is behind the likelyhood to underperform is based on the higher trading fee's and higher short-term capital gains tax on frequent trading. However, with IBKR and other platform fees so low (e.g. $1 per trade), and non-US investors not needing to pay Capital Gains tax, how does this argument still hold?galawdawg wrote: ↑Wed Jan 25, 2023 2:56 pmA buy and hold approach consistently beats trading on trends over the long-term.NiceUnparticularMan wrote: ↑Wed Jan 25, 2023 2:34 pmUnfortunately, though, we have to put our long-term savings somewhere.
And as is often the case when dealing with long-term planning in a very unpredictable world, the best answer may not be so much trying to guess the answer that will be right in hindsight, but rather the answer that will definitely not be right, but may be sufficient over a wide range of possible right answers.
Moving your investments around trying to chase returns or trying to get ahead of what the market will do tomorrow, next month or next year is a fool's errand.
Those are the keys to investment success!
Thanks.
Re: International Stocks return will be superior to US
Mr.BB wrote: ↑Wed Jan 25, 2023 2:19 pm In March 2010, Vanguard predictions for stocks and bonds over the next decade would be 6% stocks and 2% bonds
https://retirementincomejournal.com/art ... e-returns/
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Re: International Stocks return will be superior to US
At least part of the point is this cuts both ways. A significant component of the US "overperformance" versus ex-US from 2012 to 2022 was the strengthening of the USD. Unless people have a good reason to expect that strengthening USD to continue over the next 10 years, then that part of recent US "overperformance" is similarly not projectable.Anon9001 wrote: ↑Thu Jan 26, 2023 12:34 am Its important to disentangle the effects of currency on Ex US Stocks Return from the Return of the Stocks themselves. Recently USD weakened so returns of Ex-US stocks got a boost from it. Unless you expect this to continue for some reason there is no reason to state this like its a valuable information.
Vanguard, incidentally, has a central estimate of a weakening USD over the next 10 years. Again, they fully acknowledge that is not a certainty, but their model apparently thinks it is more likely than not, and they suggest that makes sense for policy reasons.
Which does make some sense. First, the USD was recently hitting highs last seen in the early 2000s, and before that the early 1980s, and is still on the higher side despite the recent weakening. Second, the USD can be too strong from the perspective of the best interests of the US (indeed, I have long thought "strong" and "weak" were unfortunate terms in that some people assume stronger is better). Right at the moment, a strong USD is arguably helping moderate inflation a bit by lowering the USD price of imports. But like most such monetary ways of fighting inflation, that risks avoidable harm to the domestic economy if continued indefinitely.
So no one knows for sure, but the consensus central track for US inflation is to continue declining this year, and for the Fed at some point to start easing back on rates (maybe pausing sooner than expected given recent favorable data, but we shall see). But broadly speaking, over a 10-year horizon, at least hopefully inflation is moderated to the point that monetary policy can refocus on longer-term economic policy.
Which might mean the USD eases back toward more normal exchange levels, which would then provide a boost over that period to ex-US stocks for USD investors.
Or not. We don't know for sure, but we similarly can't assume the USD will strengthen more either. And for what it is worth, Vanguard is saying they think easing back to more normal levels is somewhat more likely.
Re: International Stocks return will be superior to US
Already happened for the first month of the year. The USD is down something like 10% since highs of last year and international stocks have had a good run recently. They are flat against SP500 over the past year, and significantly up over 6 months to date at 9.5% vs 2.5%. International outperformance this year seems quite possible especially if the dollar continues to fall. European stocks would leap forward, imho, if the war were to end this year.
Over the past 5 plus years international is vastly behind US stocks and it would take years of outperformance to change that.
Over the past 5 plus years international is vastly behind US stocks and it would take years of outperformance to change that.
70% Global Stocks / 30% Bonds
Re: International Stocks return will be superior to US
My point was the Vanguard PHDs use empirical data. You know, actual spreadsheets with historical macro data and historical stock returns they can use for statistical analysis?
My point wasn't that you need a PHD to do this, just that you don't appear to have done this, so I don't understand why you think you have a clue what you are talking about.
(I'm not trying to insult you, I have not done this either.)
I imagine there's probably something like 10 or more variables effecting stock prices and Buffet really means "when all other variables have not changed, if interest rates go up, asset valuations go down."" If you would like I could refer to Warren Buffet on it... I think, he among others said :when interest rates go up, asset valuations go down. "
Vanguard is also making a 10 year prediction, so unless you know where interest rates are going to be 10 years from now this isn't relevant.
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Re: International Stocks return will be superior to US
LOL, this is almost like predicting a market crash. Of course a market crash IS always coming, but when? Of course the International stocks will have its day in the sun, but is it going to happen during my investment life?