FTSE vs NIKKEI vs S&P vs NASDAQ

[yieldhog]

I noticed that the NIKKEI has recently reached it's highest level since the all time high in 1989. This got me thinking about how this compares with other major stock markets. A quick check revealed the following, in round numbers:

NIKKEI x6
FTSE All Share x4
S&P 500 x14
NASDAQ x33

Certainly food for thought. Personally, I will be taking a look at my asset allocations in various portfolios to see if I need to make some adjustments.

Y

[Golam]

Past performance ----

[odysseus2000]

I noticed that the NIKKEI has recently reached it's highest level since the all time high in 1989. This got me thinking about how this compares with other major stock markets. A quick check revealed the following, in round numbers:

NIKKEI x6
FTSE All Share x4
S&P 500 x14
NASDAQ x33

Certainly food for thought. Personally, I will be taking a look at my asset allocations in various portfolios to see if I need to make some adjustments.

Y

Poor FTSE, stuffed full of yesteryears growth companies, starved of today's growth business. It is a good reflection on the state of the UK economy and if one widens the net one can see similar trends in the economies of Europe. Still the politicians keep getting rich even if the voters who elected them are getting poorer.

Regards,

[GrahamPlatt]

https://i.dailymail.co.uk/1s/2020/03/11 ... 468701.jpg

Don’t know how accurate that graph is, but FTSE 100 TR doen’t look too shabby over that time period.

[yieldhog]

Sadly, the past numbers show the same pattern year after year for at least the last 35 years. I daresay someone might be able to find some facts andor figures to support the argument for putting all your eggs in the UK basket, but it would take a massive change in the current world order to ignore the following numbers:

When I previewed the following figures they they had all got jumbled up with the text but they show percentage changes over 10,5 and 1 year. For example, the NIKKEI over 10,5 and 1 year has increased by 142,69 and 28 percent.

10 5 1
NIKKEI x6 142 69 28
FTSE All Share x4 15 11 0
S&P 500 x14 157 72 20
NASDAQ x33 383 146 54

I should add that these numbers do not take account of currency movements and we all know what direction they have been going.

But as someone once said, if you torture statistics long enough they will tell you what you want to know.

Y

[vand]

The problem is recency bias always skews ones thinking into "why don't I just invest in what has done well recently?"

I hear this ALL the time - why don't I just buy the S&P 500?

Well if you had asked this same question only 10 years ago the investment case is nowhere near as clear cut?

https://ofdollarsanddata.com/should-you ... -s-stocks/

[Adamski]

Poor FTSE, stuffed full of yesteryears growth companies, starved of today's growth business. It is a good reflection on the state of the UK economy and if one widens the net one can see similar trends in the economies of Europe

These growth businesses are on very high PE multiples. The santa rally Nov & Dec was largely the magnificent 7, as you know my view ... when a crash does happen (2000, 2008) it'll be US Tech/Tesla which have furthest to fall.

The unloved ftse100 is an international index of multinationals. You're right that It does lack Technology which is partly why done badly. Does not reflect UK economy, Ftse250 better measure.

[Lootman]

The problem is recency bias always skews ones thinking into "why don't I just invest in what has done well recently?"

I hear this ALL the time - why don't I just buy the S&P 500?

Well if you had asked this same question only 10 years ago the investment case is nowhere near as clear cut?

https://ofdollarsanddata.com/should-you ... -s-stocks/

The US market had been fairly pedestrian up to about 1990, which of course was also about the time that the Japanese market topped out and then crashed. So subsequent US out-performance is attributable partly to Japan peaking but also due to the rise to dominance of US tech companies.

So I would suggest that it is not just "recently" that the US market has been working, but for about 35 years! In that time Japan has gone from 40% of global market cap to about 10% of global market cap. The UK has gone from 10% to 4%. Europe isn't much better. If you have not been in North America or Asia ex-Japan n the last 35 years you have almost definitely under-performed the global index.

You might counter that the US in 2024 is like Japan in 1989. Given how China has faltered my inclination is to have 75% in the US and Japan, and almost nothing in the UK and Europe. The rest in emerging markets, alternative assets and cash. I will never bet against Uncle Sam.

[vand]

The problem is recency bias always skews ones thinking into "why don't I just invest in what has done well recently?"

I hear this ALL the time - why don't I just buy the S&P 500?

Well if you had asked this same question only 10 years ago the investment case is nowhere near as clear cut?

https://ofdollarsanddata.com/should-you ... -s-stocks/

The US market had been fairly pedestrian up to about 1990, which of course was also about the time that the Japanese market topped out and then crashed. So subsequent US out-performance is attributable partly to Japan peaking but also due to the rise to dominance of US tech companies.

So I would suggest that it is not just "recently" that the US market has been working, but for about 35 years! In that time Japan has gone from 40% of global market cap to about 10% of global market cap. The UK has gone from 10% to 4%. Europe isn't much better. If you have not been in North America or Asia ex-Japan n the last 35 years you have almost definitely under-performed the global index.

You might counter that the US in 2024 is like Japan in 1989. Given how China has faltered my inclination is to have 75% in the US and Japan, and almost nothing in the UK and Europe. The rest in emerging markets, alternative assets and cash. I will never bet against Uncle Sam.

Yep - the US economy is about 25% of the global economy and no going to hugely exceed that, and yet their equity markets account for about 65% of total global market cap. While I wouldn't like to put a maximum number on it, it's unreasonable imo, given what we know about the nature of competition, economic growth, capital allocation etc that this spread will increase indefinitely (ie that the US will always outperform).

Could US dominance go to, say, 75%? I mean, sure, if it has another decade of outperformance... I don't think that's likely, though. I think mean reversion is probably going to happen at some time, alhtouhg I don't know if that means US share going down to 60%, 50% or 40%, but once in motion the pendulum tends to swing further than most people imagine.

[Lootman]

The US market had been fairly pedestrian up to about 1990, which of course was also about the time that the Japanese market topped out and then crashed. So subsequent US out-performance is attributable partly to Japan peaking but also due to the rise to dominance of US tech companies.

So I would suggest that it is not just "recently" that the US market has been working, but for about 35 years! In that time Japan has gone from 40% of global market cap to about 10% of global market cap. The UK has gone from 10% to 4%. Europe isn't much better. If you have not been in North America or Asia ex-Japan n the last 35 years you have almost definitely under-performed the global index.

You might counter that the US in 2024 is like Japan in 1989. Given how China has faltered my inclination is to have 75% in the US and Japan, and almost nothing in the UK and Europe. The rest in emerging markets, alternative assets and cash. I will never bet against Uncle Sam.

Yep - the US economy is about 25% of the global economy and no going to hugely exceed that, and yet their equity markets account for about 65% of total global market cap. While I wouldn't like to put a maximum number on it, it's unreasonable imo, given what we know about the nature of competition, economic growth, capital allocation etc that this spread will increase indefinitely (ie that the US will always outperform).

Could US dominance go to, say, 75%? I mean, sure, if it has another decade of outperformance... I don't think that's likely, though. I think mean reversion is probably going to happen at some time, alhtough I don't know if that means US share going down to 60%, 50% or 40%, but once in motion the pendulum tends to swing further than most people imagine.

Japan only declined when the US was ready to take over stock market leadership. So for the US to experience a similar crash there must be another market to pick up the slack.

And where is that? 10/15 years ago I might have thought China. But government interference and insider manipulation makes China borderline uninvestable. Europe is moribund. Hard to see where the new market leadership can come from.

Again, much of that 75% of global GDP that is outside the US is in places you cannot or would not want to invest e,g. communist nations, dictatorships, Arab nations and so on. The US doesn't just give you world-beating growth shares, it gives you a sound regulatory framework, a sound democratic foundation, the world's reserve currency, military domination and a place where nobody worries about any threat to capitalism and free markets.

I would diversify away from the US more but I cannot see a safer home for my money. The growth play is also the safety play.

[vand]

Yep - the US economy is about 25% of the global economy and no going to hugely exceed that, and yet their equity markets account for about 65% of total global market cap. While I wouldn't like to put a maximum number on it, it's unreasonable imo, given what we know about the nature of competition, economic growth, capital allocation etc that this spread will increase indefinitely (ie that the US will always outperform).

Could US dominance go to, say, 75%? I mean, sure, if it has another decade of outperformance... I don't think that's likely, though. I think mean reversion is probably going to happen at some time, alhtough I don't know if that means US share going down to 60%, 50% or 40%, but once in motion the pendulum tends to swing further than most people imagine.

Japan only declined when the US was ready to take over stock market leadership. So for the US to experience a similar crash there must be another market to pick up the slack.

And where is that? 10/15 years ago I might have thought China. But government interference and insider manipulation makes China borderline uninvestable. Europe is moribund. Hard to see where the new market leadership can come from.

Again, much of that 75% of global GDP that is outside the US is in places you cannot or would not want to invest e,g. communist nations, dictatorships, Arab nations and so on. The US doesn't just give you world-beating growth shares, it gives you a sound regulatory framework, a sound democratic foundation, the world's reserve currency, military domination and a place where nobody worries about any threat to capitalism and free markets.

I would diversify away from the US more but I cannot see a safer home for my money. The growth play is also the safety play.

All that may be true and the US may have the best companies, but you are paying a hefty premium for it - one that is currently far higher than it's historical range. Investing is more than just picking the best growers, and historically there has been no clear correlation between current rate of growth and future investment return because the market prices the growth into the price and usually overestimates an entity's ability to meet those high expectations.

[NotSure]

So short S&P, long FTSE?

Genuinely, good luck with that one.

PERs are backwards looking, but any company that is content to hose away maybe 8% of its market cap each year is not likely to generate a rising PER IMHO. (That is not to say such a company is a bad investment).

The "magnificent 7" are spending (R&D) heavily in areas that will undisputedly grow and are skilful monopolizers (not sure that's a word). Or do you think the digital world we now live in is just a short term fad? All in on pens and paper?

[odysseus2000]

Japan only declined when the US was ready to take over stock market leadership. So for the US to experience a similar crash there must be another market to pick up the slack.

And where is that? 10/15 years ago I might have thought China. But government interference and insider manipulation makes China borderline uninvestable. Europe is moribund. Hard to see where the new market leadership can come from.

Again, much of that 75% of global GDP that is outside the US is in places you cannot or would not want to invest e,g. communist nations, dictatorships, Arab nations and so on. The US doesn't just give you world-beating growth shares, it gives you a sound regulatory framework, a sound democratic foundation, the world's reserve currency, military domination and a place where nobody worries about any threat to capitalism and free markets.

I would diversify away from the US more but I cannot see a safer home for my money. The growth play is also the safety play.

All that may be true and the US may have the best companies, but you are paying a hefty premium for it - one that is currently far higher than it's historical range. Investing is more than just picking the best growers, and historically there has been no clear correlation between current rate of growth and future investment return because the market prices the growth into the price and usually overestimates an entity's ability to meet those high expectations.

Yes, this has happened many times, but that is also no guarantee that it will happen again.

If the current leaders in innovation are to become yesterday’s stars then there needs to be entities who replace them. AI could be such an entity, but this too is dominated by the current growth leaders.

In some ways the arguments that growth must become too expensive & die is the argument used against the premier league with some believing that the salaries of premier league players & supporting ticket prices would cause it to implode, but it seems to have become more powerful & those outside weaker.

If the US is to collapse it will likely come from internally blowing up & there are plenty of signs that is currently happening.& the coming election may trigger it, but there are huge vested interests focused on preserving the union & if these prevail it is very difficult for me to see credible threats. Sure a nuclear war is another issue that could destroy US business success, but if that happens there will be more important things to concern all of us.

Regards,

[vand]

All that may be true and the US may have the best companies, but you are paying a hefty premium for it - one that is currently far higher than it's historical range. Investing is more than just picking the best growers, and historically there has been no clear correlation between current rate of growth and future investment return because the market prices the growth into the price and usually overestimates an entity's ability to meet those high expectations.

Yes, this has happened many times, but that is also no guarantee that it will happen again.

If the current leaders in innovation are to become yesterday’s stars then there needs to be entities who replace them. AI could be such an entity, but this too is dominated by the current growth leaders.

In some ways the arguments that growth must become too expensive & die is the argument used against the premier league with some believing that the salaries of premier league players & supporting ticket prices would cause it to implode, but it seems to have become more powerful & those outside weaker.

If the US is to collapse it will likely come from internally blowing up & there are plenty of signs that is currently happening.& the coming election may trigger it, but there are huge vested interests focused on preserving the union & if these prevail it is very difficult for me to see credible threats. Sure a nuclear war is another issue that could destroy US business success, but if that happens there will be more important things to concern all of us.

Regards,

I do somewhat agree with this - today we see the "positive networking effect" in big tech which creates its own economic moat to a degree that we haven't seen before in previous stock market cycles. That said, I still believe that human nature is what ultimately shapes these growth/maturity stories and that it will always be a powerful force or inertia which leads to competition and regeneration, and that will always be the case through AI and whatever other technologies shape the future. Today BigTech is FULL of overpaid, overpriviledged and lazy workers who fundamentally see their employment as a cash cow, totally removed from the entreprenurial and engineering culture that got those companies there in the first place. that alone convinces me that they will eventually be replaced by new leadership.

[odysseus2000]

Yes, this has happened many times, but that is also no guarantee that it will happen again.

If the current leaders in innovation are to become yesterday’s stars then there needs to be entities who replace them. AI could be such an entity, but this too is dominated by the current growth leaders.

In some ways the arguments that growth must become too expensive & die is the argument used against the premier league with some believing that the salaries of premier league players & supporting ticket prices would cause it to implode, but it seems to have become more powerful & those outside weaker.

If the US is to collapse it will likely come from internally blowing up & there are plenty of signs that is currently happening.& the coming election may trigger it, but there are huge vested interests focused on preserving the union & if these prevail it is very difficult for me to see credible threats. Sure a nuclear war is another issue that could destroy US business success, but if that happens there will be more important things to concern all of us.

Regards,

I do somewhat agree with this - today we see the "positive networking effect" in big tech which creates its own economic moat to a degree that we haven't seen before in previous stock market cycles. That said, I still believe that human nature is what ultimately shapes these growth/maturity stories and that it will always be a powerful force or inertia which leads to competition and regeneration, and that will always be the case through AI and whatever other technologies shape the future. Today BigTech is FULL of overpaid, overpriviledged and lazy workers who fundamentally see their employment as a cash cow, totally removed from the entreprenurial and engineering culture that got those companies there in the first place. that alone convinces me that they will eventually be replaced by new leadership.

There is certainly over staffing & complacency in the US tech sector, but there are also lots of emerging US tech business that are well funded & have strong ambitions.

In addition there is the Twitter take over where a large number of staff were shed without any appreciable decline in the service offered by Twitter. Sure many advertisers legged it, but the reports from the new management are a gradual return of many although not all with some big ones still absent. Nevertheless it sets a precedence for future take overs & the spending on AI looks to be excessive potentially leading to shareholder unhappiness & takeovers with aggressive job reductions by new management. As of now most of the potential new managements & business look to be US based & the US actively defends against hostile foreign take overs if such things emerge.

Looking forwards it is possible that India emerges as a major player with less centralized control than China, or China may change course under a different leader or Europe might wake up, but I don’t see any of this happening in the short term, say 5 years.

Currently everything will be clearer after the US election. If there is going to be internal US strife this is the likeliest short term catalyst, but this kind of potentially emotional & violent internal explosion is very difficult to predict with any clarity. The polarization between the incumbent & challengers for the Whitehouse is strong, but so is the sense of the union in the minds of Americans. Law enforcement, CIA & the military have some interesting times ahead with the various disruptive organizations likely being well penetrated & vulnerable to Federal action if things start to get out of control, but revolutions & civil wars have happened so one never knows the future.

Regards,