Thanks, good to hear that someone besides my mom finds these interesting!
(Just kidding – my mom doesn’t read them either).
Historically, US and intl stocks have traded leadership back and forth over time.
(Note: Japan is removed from developed int’l in this chart because the late 80s Japan bubble jacks up the otherwise pretty clear pattern).
Tough to say why they cycle back and forth like that. In this latest cycle, it’s definitely the case that US earnings held up better than international, so some of the outperformance was legit. But then it went way beyond that.
It just seems that these cycles reinforce themselves… something goes up, then people think it must be better, so they buy it, and it goes up more, etc. And the whole way, people rationalize it, and the continued trend justifies and strengthens their rationalizations. Until something puts the cycles into reverse.
BTW, the EAFE-ex Japan series outperformed the US (slightly) from 1972-2008. The entirety of US outperformance has happened in just the last 12 years. I’ll bet a lot of the “US stocks are inherently superior” crowd would be surprised to learn that.
Anyway that’s my take. As for what causes a potential reversion, I don’t think that’s identifiable in advance. There’s a big shakeup happening right now; I wouldn’t be surprised if this turns out to be it. But there’s no way to know, in my view.
