The past 10 years have been phenomenal for U.S. stocks. If you’re reading this, you probably know that the same can’t be said for stock markets outside the United States.
Forecasts rarely come true. That said, as somebody who is a big believer in international diversification, I really hope this one from Vanguard doesn’t miss the mark by too much:
“We expect higher international equity returns over the next decade compared with the last, and we believe that U.S. equity returns will be about 8 percentage points lower than the last decade on an annualized basis.”
The arguments they use for international stocks outperforming could have been made five years ago, and in fact, they were. They said, “That probability stands at 80% as of September 2020, compared with 65% in September 2015.”
I suppose there are still 5 years left in that decade-long forecast, but given what’s happened over the last five years, I’d go with the 35%.
Past is rarely prologue, except for the times when it is. Investors should always prepare for a range of outcomes, including it being different this time.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.