The high growth, Emerging Markets (EMs) have watched their stock markets tumble.
On the other end of the spectrum is the wildly volatile Japanese Nikkei. Even after tumbling into a bear market this year, the market is still up 36% year-to-date and 57% from a year ago.
But the happiest equity investors in the world should probably be the ones with money in the U.S. stock markets.
Not only is the U.S. outperforming the EMs, it’s also outperforming the Developed Markets (DMs). This goes for year-to-date and one year returns.
Sure, the Nikkei is crushing the S&P 500 in terms of returns. But volatility has been much lower.
From Deutsche Bank’s Priyal Mulji and John-Paul Smith:
Over the last 12 months, EM equities have underperformed DM equities by -15.7%. In absolute terms, EM returned +2.4%, whilst DM returned a much higher +18.1%. Against the US, which has been one of our most favoured markets, EM underperformed by -17.1% (absolute US returns over the last 12 months were +19.5%)…
Here are the 12-month returns:
Here’s Mulji and Smith on year-to-date returns:
…The poor total returns generated by EM equities have been even more pronounced over 2013 YTD, when the relative underperformance versus DM equities has been -18.0%. So far in 2013, EM equities have recorded significant negative returns in absolute terms of -9.6%, whilst DM has remained positive at +8.4%. US equities have delivered even higher absolute returns of +13.3% YTD, implying EM relative underperformance of -23.0% over the same period.
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