American shares are poised for another year of leading global markets by a hefty margin, based on a set of ETFs through Friday’s close (Dec. 20). US stocks in 2024 will likely take the performance crown with a red-hot gain for a second straight calendar year. This year’s losers are confined to various flavors of foreign bonds. The deepest loss year to date: inflation-indexed government bonds ex-US. The Global Market Index (GMI) is heading for another strong increase in 2024.
So far this year, GMI is up 17.5%, virtually matching its sharp rise in 2023. GMI is an unmanaged benchmark (maintained by CapitalSpectator.com) that holds all the major global stock and bond market indexes. The lopsided results in favor of American shares in 2024 – again – are a reminder that portfolio strategy success, or failure, has once more relied heavily on asset allocation. For passive or active managers, one decision above all else has been crucial: How much to hold in US stocks. After two straight years of winning by a wide margin, portfolio strategists are faced with a familiar choice that could once more be decisive: Will US stocks deliver a third straight year of unusually potent results? The debate is furious and the stakes are high, as is the uncertainty. Unsurprisingly, warnings that the US stock market is a bubble are widespread, in part because valuation is high. The CAPE ratio (cyclically adjusted price-to-earnings ratio), for example, is near 38, which is close to a 145-year high. The elevated reading suggests that expected returns are relatively low, perhaps even negative, depending on the modeling and ex ante time horizon. Yet there are optimists who see US-led outperformance continuing for a third year. “We expect the bull market in global equities will likely continue in 2025, with the U.S. again likely to outperform the rest of the world,” says Arun Bharath, chief investment officer at Bel Air Investment Advisors in Los Angele
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