Last night, I learned that a friend of mine shifted all his money out of US markets and into international stocks -- because of fear of US stock market turmoil.
I couldn't think of a worse move. First, it's a little bit of chasing performance -- which never works. For years, international markets were the worst place to put your money. Lately, they've been on fire. And, with every advisor now saying to up your % of foreign stocks, you know the writing is on the wall. Also, it's not like every country out there is going to do better if America is dragged down.
Second, as the markets proved today, it's naive to think that the stock markets aren't interrelated in today's age of GLOBAL trading, sovereign funds, etc.
3 comments:
Tragic...but was he really chasing returns? or was he maybe trying to diversify for risk-management?
One is nobler than the other...though the result is the same today.
I think de-coupling as a notion is heading into oblivion. Today's rout was fear-based...not yet based on any hard data that world economies are feeling the direct effects of a slowing US. That will happen later this year...maybe into next.
-G
BTW - looks like I might get my S&P500 @ 1200 sooner rather than later!
Too bad I didn't pull the trigger on that trade...just didn't feel like running after that bus...
-G
to a certain extent, he evaluated the recent returns of us equities vs foreign, and that was a big reason.
this article is very good on this subject:
http://www.fundadvice.com/FEhtml/PsychHurdles/0304b.html
yeah, s&p1200 is looking more like a reality! i looked at some long term puts and they were all so expensive, i didn't pull the trigger either!
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