US or International Stocks in 2018: A Comparative Analysis

In 2018, investors faced a pivotal decision: should they invest in US stocks or explore opportunities in the international market? This article delves into the performance of both US and international stocks in 2018, offering insights to help investors make informed decisions.

US Stock Market Performance in 2018

The US stock market, represented by indices such as the S&P 500 and the NASDAQ, delivered a strong performance in 2018. The S&P 500 index gained nearly 6% for the year, driven by solid economic growth, low unemployment, and favorable corporate earnings. Key drivers included:

• Economic Growth: The US economy experienced robust growth, with GDP expanding at an annualized rate of 3.1%.
• Corporate Earnings: US companies reported strong earnings, with the S&P 500 companies achieving an earnings growth rate of 20.5%.
• Low Unemployment: The unemployment rate remained at historically low levels, further supporting economic growth.

International Stock Market Performance in 2018

In contrast, the international stock market performed less impressively in 2018. The MSCI ACWI ex US index, which tracks the performance of international stocks excluding the US, posted a negative return of -5.5% for the year. Key factors contributing to this decline included:

• Global Economic Slowdown: The global economy faced challenges, with GDP growth slowing in many regions.
• Trade Tensions: Escalating trade tensions between the US and China created uncertainty and impacted investor sentiment.
• Political Risks: Several countries experienced political instability, further weighing on the international stock market.

Comparative Analysis

While the US stock market outperformed international stocks in 2018, it's important to consider the following factors:

• Currency Fluctuations: The US dollar strengthened in 2018, which negatively impacted the returns of international stocks when converted back to USD.
• Diversification: Investing in international stocks can provide diversification benefits, reducing exposure to domestic market risks.
• Long-term Perspective: Over the long term, international stocks have historically provided higher returns than US stocks, driven by faster economic growth in many emerging markets.

Case Studies

To illustrate the performance of US and international stocks in 2018, consider the following case studies:

• US Stock: Apple Inc. (AAPL): Apple's stock price increased by 29.7% in 2018, driven by strong iPhone sales and robust earnings growth.
• International Stock: Tencent Holdings Ltd. (0700.HK): Tencent's stock price increased by 44.6% in 2018, driven by its strong performance in the gaming and digital advertising sectors.

Conclusion

In 2018, the US stock market outperformed international stocks, but investors should consider various factors when deciding where to allocate their investments. While the US market offers stability and growth potential, international stocks can provide diversification and long-term returns. It's crucial to conduct thorough research and seek professional advice before making investment decisions.