Outlook for the 2020s and Okay, So What Do I Do Now? concluded that on the basis of valuations commodities are likely to outperform US stock over the coming decade. A related point is that relative returns between US stocks and commodities have tended to oscillate in long sweeping cycles. DoubleLine, led by famed investor Jeff Gundlach, has produced a chart visualizing this phenomenon that strikingly illustrates this, and the ‘you are here’ point at which the chart concludes is a persuasive omen of the this likely outperformance over the coming years. This was referred to in my first reply to JK in the former of the two posts linked above.
Next let’s look at nonUS stocks. As with commodities, I didn’t attempt to lay out a detailed argument in my earlier posts, but rather focused on the big picture. My valuation logic isn’t original with me anyway … rather I’ve sought out the work of the best and brightest in the field. In the case of stocks, that includes a number of leading lights, such as Grantham, Mayo & Van Otterloo and Research Affiliates. The latter firm recently published an article on Advisor Perspectives that discusses nonUS stocks versus US stocks that provides much of the intellectual heft for the likely outperformance of the former. Although this research breaks nonUS stocks into separate categories of “emerging” and “developed” (EAFE: Europe, Australasia & Far East), I believe this categorization of foreign markets is increasingly arbitrary and obsolete (not to mention fails to find a place for important markets like Canada), and in any case not particularly helpful to break out anyway since they’re both pegged to substantially outperform the US. Suffice it to say RA (as well as GMO) agree nonUS stocks are set to outperform their US counterparts in the coming years: