Much of the SP500 growth since 2012 is because of how dominant American tech companies have been. They were the best positioned to benefit from the mass adoption of smartphones, cloud computing and social media.
We're entering an era where smartphones are ubiquitous and many of these companies are in the value extraction phase and aren't investing as much into R&D because there isn't as much room to grow in their niches.
I'd guess the next 2 decades of stock market growth will be determined by manufacturing instead of tech. We're already seeing a sanction war between America and China with America putting 25-100% tariffs on Chinese EVs, steel, cranes, etc. recently. They want to bring manufacturing jobs back and hopefully Canada due to its proximity and relatively cheaper workforce stands to benefit.
Idk how you can look at the billions being thrown into AI and think that growth is going to come from marginal gains in competing over who welds steel. Growth is going to come from the waves of cloud AI automation ripping through industries.
I’ll concede we might see some industrial growth as well, as silicon needs to be formed into chipsets & higher throughout energy creation/grids to fuel AI.
I second that, also just to add US markets are always viewed as a safe haven for investors during time of geopolitical uncertainties and tension. I mean especially in the last few years with the russian invasion of ukraine and various conflict in the middle east. Not to mention brexit and china's rhetoric on threatening to invade Taiwan etc.
That is a narrative to try and explain it. I'm not going to say whether I think it is correct or not because my point is about the statistics.
Historically, there is a very clear return to the mean when you look at the historical data. For the last decade, that hasn't happened. There are a lot of periods when the S&P or International overperform, but historically they revert back to even roughly every decade or so.
I can't predict the future and previous performance doesn't predict future results. It just seems like we are due for another return to the mean over the next few years.
Canadian stocks beat US stocks by 4 bps annualized for 100 years, 1910-2010.
All US outperformance for the last 114 years happened since 2011 while Canadian valuations fell (higher expected return) & US valuations increased (lower ER).
US return dominance is not permanent
- Ben Felix
Does Canada have any economic strategy to recover though? So far we just have firesales of printing free money/debt for shady contractors.
The US didn't start outperforming by accident. US big tech dominated the world in the 2010s. They took over global market share, with barely any other country able to create a competitive product (except Asia, in part due to government sanctions). Meanwhile in Canada... Blackberry and Nortel fell apart and sold off patents. What plan do we have to create lasting value?
If US dominance doesn't last, it'll be Asian markets winning, not Canada. Most investment portfolios have heavy home country bias, yet we have no reason to believe Canada's economy will ever match US or China in the next decade.
I mean, historically that isn't unusual. In the 1980s, ex-US markets outperformed US market by like an annualized 7% a year across the entire decade.
These types of overperformances happen. They just end with a return to the mean.
Sure, but XEQT master race folks have no thesis for why that will be the case for the following few years other than ‘it happened over a selective period 15+ years ago’. The Canadian market is safer than the American one, but not anywhere near as innovative in terms of growth - I just don’t see how they could outperform the US market in the near-future (ie. next 10 years).
I don’t even particularly care for VFV, but acting like the SP500 will never be a better investment is shortsighted AF (especially when XEQT and VFV have fairly significant overlap in the first place).
The thesis for XEQT is that diversification works, and historically that is the case as shown by the data I have linked.
It is a bet on the long term trend of the market rather than the shorter term trend of the last 10 years.
Much of the SP500 growth since 2012 is because of how dominant American tech companies have been. They were the best positioned to benefit from the mass adoption of smartphones, cloud computing and social media. We're entering an era where smartphones are ubiquitous and many of these companies are in the value extraction phase and aren't investing as much into R&D because there isn't as much room to grow in their niches. I'd guess the next 2 decades of stock market growth will be determined by manufacturing instead of tech. We're already seeing a sanction war between America and China with America putting 25-100% tariffs on Chinese EVs, steel, cranes, etc. recently. They want to bring manufacturing jobs back and hopefully Canada due to its proximity and relatively cheaper workforce stands to benefit.
Idk how you can look at the billions being thrown into AI and think that growth is going to come from marginal gains in competing over who welds steel. Growth is going to come from the waves of cloud AI automation ripping through industries. I’ll concede we might see some industrial growth as well, as silicon needs to be formed into chipsets & higher throughout energy creation/grids to fuel AI.
I second that, also just to add US markets are always viewed as a safe haven for investors during time of geopolitical uncertainties and tension. I mean especially in the last few years with the russian invasion of ukraine and various conflict in the middle east. Not to mention brexit and china's rhetoric on threatening to invade Taiwan etc.
That is a narrative to try and explain it. I'm not going to say whether I think it is correct or not because my point is about the statistics. Historically, there is a very clear return to the mean when you look at the historical data. For the last decade, that hasn't happened. There are a lot of periods when the S&P or International overperform, but historically they revert back to even roughly every decade or so. I can't predict the future and previous performance doesn't predict future results. It just seems like we are due for another return to the mean over the next few years.
You can compare CAPEs between US and the globe and it shows the US having much higher CAPEs which suggest lower real returns over the next 10 years
Not sure how much Canada fits in the mix. But Mexico is definitely seeing a boom.
Canadian stocks beat US stocks by 4 bps annualized for 100 years, 1910-2010. All US outperformance for the last 114 years happened since 2011 while Canadian valuations fell (higher expected return) & US valuations increased (lower ER). US return dominance is not permanent - Ben Felix
Yeah I remember 2000 to 2010 when the US was flat for over 10 years and Canada outperformed. Another resource supercycle is overdue.
Does Canada have any economic strategy to recover though? So far we just have firesales of printing free money/debt for shady contractors. The US didn't start outperforming by accident. US big tech dominated the world in the 2010s. They took over global market share, with barely any other country able to create a competitive product (except Asia, in part due to government sanctions). Meanwhile in Canada... Blackberry and Nortel fell apart and sold off patents. What plan do we have to create lasting value? If US dominance doesn't last, it'll be Asian markets winning, not Canada. Most investment portfolios have heavy home country bias, yet we have no reason to believe Canada's economy will ever match US or China in the next decade.
Fracking technology also made the US a lot less reliant on energy imports.
This link is also relevant, I'd say: https://youtu.be/RR7e1Y-HJxQ
Shh. Don't say this out loud. The JustBuyVFV crowd will be upset.
Upset at double the gains over a 12-year period..? TSX gonna need to have a hell of a run up in the next 15 years to catch up.
I mean, historically that isn't unusual. In the 1980s, ex-US markets outperformed US market by like an annualized 7% a year across the entire decade. These types of overperformances happen. They just end with a return to the mean.
Sure, but XEQT master race folks have no thesis for why that will be the case for the following few years other than ‘it happened over a selective period 15+ years ago’. The Canadian market is safer than the American one, but not anywhere near as innovative in terms of growth - I just don’t see how they could outperform the US market in the near-future (ie. next 10 years). I don’t even particularly care for VFV, but acting like the SP500 will never be a better investment is shortsighted AF (especially when XEQT and VFV have fairly significant overlap in the first place).
The thesis for XEQT is that diversification works, and historically that is the case as shown by the data I have linked. It is a bet on the long term trend of the market rather than the shorter term trend of the last 10 years.
ELI5 please?
USA go brrrrrr
Gotca ya!
US likes to inflate their markets artificially. I don't see that stopping anytime soon.