Elections
Presidential elections are important events, but they can sometimes distract investors from focusing on financial fundamentals. While market returns can vary depending on which presidential party is in power, there is no clear and consistent trend that emerges from these variations. Instead, returns are more closely correlated with economic cycles, and they often remain positive regardless of the party in power. This suggests that broader economic factors play a more significant role in influencing market performance than the political landscape.
International vs U.S. Stocks
The U.S. stock market has reached new all-time highs following the first Federal Reserve rate cut, with tech-related stocks initially leading the rally. However, the performance has recently broadened to include many other sectors of the market, indicating a more widespread investor confidence. Despite this positive trend in the U.S., developed markets have lagged behind for over a decade, even though some of their fundamentals have improved. In recent years, these regions have shown better performance despite facing numerous economic and geopolitical risks.
Emerging markets, on the other hand, have encountered challenges due to geopolitical conflicts and economic uncertainty in various parts of the world. This asset class has always been more volatile than others, primarily due to growth concerns. Nevertheless, in the longer term, emerging markets continue to play a crucial role in portfolio diversification, offering potential growth opportunities despite the recent uncertainties.
Long Term Averages
When investing, it is crucial to focus on long-term averages and trends, as attempting to time the market can be challenging. For instance, the S&P 500 (IVV) has shown strong average annual performances over the long term, with a 10-year return of +13.99% and a 15-year return of +13.98%. In comparison, Developed International Markets (EFA) have delivered a 10-year return of +6.03% and a 15-year return of +5.59%, while Emerging Markets (EEM) have experienced more modest growth, with a 10-year return of +3.35% and a 15-year return of +2.83%. These figures highlight the importance of maintaining a long-term perspective to navigate the inherent volatility and achieve consistent growth in investment portfolios.