Past Performance vs. Future Results

We’ve established the unpredictability of the market from year to year, but let’s look at two countries that exemplify this well. Consider the performance of the US and Denmark, shown above. Is it immediately clear which country had the higher return over the past two decades?

From First to Worst

Denmark, in fact, was the best performer among all developed markets, with an annualized return of 9.1%. Surprisingly perhaps, Denmark had the best calendar year return only once, in 2015, The US, despite some strong returns in the last several years, placed ninth overall with an annualized return of 4.9%. Bear in mind, Denmark represents less than 1% of the global market cap available to investors.

Denmark also provides an example of the unpredictability in short-term results. After posting the highest developed market return in 2015, Denmark had the lowest return in 2016. Countries have also moved in opposite direction, from worst to first, in consecutive years. In 2000, New Zealand had the lowest return among developed markets followed by the highest return in both 2001 and 2002. In emerging 

markets, Hungary and Russia went from the bottom two performers in 2014 to the top two performers in 2015.

US vs Denmark: Who Performed Better? 1999 - 2018

Now, the Good News

Fortunately, no one needs to be an expert in every region to benefit from the opportunities these regions represent.

This evidence of the randomness in global equity returns, though, is not bad news for investors. Rather than trying to guess which country is going to outperform, investors committed to a well-structured, globally diversified portfolio are better positioned to capture the performance of the global markets, where and when it occurs.

Over the last 20 years, every dollar invested in a globally diversified strategy nearly tripled.

A globally diversified approach can deliver more reliable outcomes over time with less volatility than investing in individual countries. This can help investors stay on track, through all kinds of markets, toward their long-term goals.