UPDATE: Why U.S. stocks don't belong in a global portfolio--now, say strategists
By Anora M. Gaudiano, MarketWatch
U.S. equities have enjoyed such a record-setting climb within the past year that long-term expected returns look dismal compared with other assets around the globe, causing analysts at Research Affiliates to advise against including U.S. equities in an investment portfolio--at least now.
That might seem like an extreme tacked.
After all, stock-market bears have persistently declared equities overvalued, notably over the past two or three years, only to witness an unrelenting rally for the Dow Jones Industrial Average , the S&P 500 and the Nasdaq Composite Index that has seen all three up at least 16% so far in the 2017. That means, avoiding U.S. stocks this year might have cost investors sizable potential gains.
Moreover, the S&P 500 nominal annualized three-year return as of Sept. 30, 2017, was nearly 11% while five-year return was 14%.
Meanwhile, a globally diversified portfolio, returned less than 2% for both three-year and five-year periods.
So, why would anyone want to diversify?
Researchers Jim Masturzo and Jonathan Treaussard of Research Affiliates make the case that investing internationally and diversifying your portfolio might outweigh the risks of missing out over the long term.