USA can’t be beat?

Hi Carl.

Good question.

The short answer is because we can’t know if the US will keep outperforming as it has since the GFC.

During the 2000s decade, the US performed horribly (zero returns from 2000 to 2013 in fact), and ASX way outperformed during that decade. Up until the GFC, international shares as a whole and US shares had basically the same long term performance. Since then the US has broken away, but it remains to be seen if this sustains itself indefinitely.

And since 1900, US and ASX have actually performed about the same – among the best markets in the world.

You can of course make a bet that the US will continue dominating… but remember US companies (tech especially) is priced very highly right now by basically all metrics because everyone is expecting such an outcome. The high valuations themselves mean companies have to actually perform incredibly well just to meet expectations, let alone beat them.

Betting your portfolio on a single market, driven by a relatively small bunch of companies might seem like a one-way bet. But the reality is the world can and does change over time, and the future is far from certain, so diversification makes sense in my view. You may see it differently.

All the best :)
Dave