John Husselbee

Chart Of The Month

May 2019

John Husselbee

US outperformance reaches historic high: is it peaking?

 

May’s Chart Of The Month shows US outperformance relative to the rest of the world during my 30+ year career. We are experiencing the most pronounced outperformance during this period, outdoing the previous peak at the height of the tech bubble in the late 1990s. After that, we witnessed a long retrenchment back towards parity over the 2000s. Could history repeat?

 

We know US equities have far outstripped the rest of the world since the global financial crisis, driven by the country’s early adoption of quantitative easing and interest rate cuts – and, more recently, tax reductions and the growth trade in the shape of surging FAANG (Facebook, Apple, Amazon, Netflix and Google) names. But trees don’t grow to the sky, as the proverb goes, and we have seen billions of dollars wiped off tech amid the panic that gripped markets in the last part of 2018, not to mention recent weeks when Google parent Alphabet failed to meet investor expectations.

 

An environment of rising rates and inflation may well be the catalyst for value to outperform, which we saw signs of in Q4 last year. Our portfolios remain tilted towards value and we would also expect other parts of the world to come to the fore, particularly our favoured Asia and emerging markets, as the US endures a reversion to the mean.

 

Given the fact we are moving into a quantitative tightening period, we expect to see a similar pattern to US outperformance to that of the noughties in the months and years to come.

 

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Key Risks & Disclaimer

Please remember that past performance is not a guide to future performance and the value of an investment and any income generated from them can fall as well as rise and is not guaranteed, therefore you may not get back the amount originally invested and potentially risk total loss of capital.

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Monday, May 20, 2019, 12:09 PM