I grew up in my hometown surrounded by people who looked like me, with little variety in race or religion, and I met and fell in love with my husband at our church’s youth group where both our families attended.
Next week my husband and I will fly to India for our son’s wedding. He met and fell in love with a fellow graduate student at Ohio State, where they were both pursuing PhDs in mechanical engineering. They married here in May, and now we’ll be participating in a three-day Hindu wedding celebration in her father’s hometown. Our daughter-in-law is from the other side of the world, but her shared values and warm presence are our ideal version of the girl next door. We’re very happy to have her as our second daughter.
In the late 60’s as I was growing up, the U.S. stock market made up 75% of the available stocks to invest in around the world. Put another way, if you were only invested in U.S. stocks in 1968, you were missing out on just a fourth of the available investment opportunities around the world, and a significant portion of what you were missing was made up of countries you would not want to be invested in anyway.
By the late 80’s, when I left my job to strike out on my own and start TAAG, the U.S. made up only 1/3 of the world’s investable assets. At the time, we thought Japan was on track to take over the world, as its share of the global market had grown to 45%. Japanese investors were buying up significant portions of U.S. real estate including Rockefeller Square and much of Hawaii, and people joked we soon would be speaking Japanese as a second language. But this boom time for Japan was followed by a decades long recession, and by 2012 Japan’s share of the global market had fallen to 8%.
After our Great Recession, headlines from 2009 to 2012 focused on America’s lost decade of investing and pointed out that the S&P 500 had returned virtually nothing to investors from its peak in mid-2000. The United States came out of the recession with help from economic policies that included interest rate cuts and company rescues, but the U.S. stock market didn’t recover to its 2000 peak until the spring of 2013.
From March 2009 to the present, the U.S. stock market represented by the Dow Jones Industrial Average has climbed over 480%, helped by reductions in business regulations and tax cuts. Our share of the global market climbed to more than 55%. The Lost Decade has been forgotten, and some investors are beginning to feel their portfolios should be concentrated in U.S. stocks, just as some wanted to increase their portfolio’s investment in Japan in the late 80’s.
It would be naïve of us to think this pace will continue indefinitely. As we’ve shared in meetings, the S&P 500 has periods of outperformance, but longer periods of underperformance as well, and a globally diversified portfolio provides the best opportunity for a greater accumulation of wealth and a steadier source of financial support during retirement.
With constant changes in our world, and our place in it, it’s unlikely that any country will continue to dominate or outperform the others without some correction or adjustment. It doesn’t mean the U.S. is destined to shrink in influence or financial strength, it’s just that other countries are growing in financial strength and influence too.
Our family is just a small example of the diversification of cultures that are happening every day. To stay financially successful, we must accept the reality that our place in this world is changing every day too. Remaining diversified helps us be prepared for whatever changes may come.