U.S. vs. International Equities
This article, published by Fidelity, discusses the cyclical nature of out-performance and under-performance of international equities vs. U.S. equities. The article also provides data that shows blending U.S. and international equities has historically delivered returns equal to U.S. equities alone but with less volatility.
- In any given year, the best performing stock market is usually outside the US.
- International diversification has historically improved risk-adjusted returns.
- International equities have had long periods of outperformance compared to U.S. equities.
- History suggests that given their cyclical nature, international stocks will eventually make a comeback and outperform their U.S. peers.
Also, the absolute return of the globally balanced portfolio is almost level with that of the all-US portfolio, despite the recent multiyear rally in US stocks. And given the cyclicality of US and foreign stock returns, history suggests their relationship could revert to its historical norms at some stage.