From the start of the market recovery in March of 2009 to the end of October, the S&P 500’s returns have nearly doubled the rest of the world.
Rob Sharps, Equity Portfolio manager for T. Rowe Price, said there are three major reasons for US stocks’ sustained pole position:
- The government made all the right moves after the crisis. “We were the most aggressive in our policy response,” said Sharpe at an outlook conference. “We recapitalized the banking system with TARP relatively quickly, we stabilized the economy with fiscal stimulus, and very aggressive monetary stimulus including three rounds of quantitative easing.”
- US companies aren’t dependent on the rest of the world. “If you look at US corporate profits, they’re less dependent on the rest of the world,” said Sharpe. “The corporate profit for the US is more domestically driven than pools outside of the US and out economy broadly is more export driven. A slow growth world has played more to that hand.”
- The US has the right kind of companies for the environment. “The US is very well represented among industries and companies that are gaining share of the economy,” said Sharpe. “Most of the global platform profit growth is driven by US companies. Facebook in social media, Amazon and Priceline in ecommerce, I think we’re the furthest along in cloud computing. There are a couple of really good biopharma companies based in Europe and Asia, but the preponderance of innovation has come out of the US.”
The gap may be widening with Japan and the Eurozone in the midst of unleashing quantitative easing, China’s slowdown dragging down export and commodity-driven economies, and the global manufacturing sector struggling.
Sharpe expects the good returns to continue, if a little slower than in past years. He remarked that earnings for companies, which have taken a hit recently, should return to positive territory in 2016 and that will lead investors back into the market, pushing prices up.
So there’s your patriotic stock outlook for the day.