Rolling 6 month returns (S&P 500 less MSCI EAFE)
Source: Bloomberg Finance, L.P. as of February 18, 2022. EAFE refers to the MSCI Europe, Australasia and Far East (EAFE) Index, which measures the equity market performance of developed markets outside of the U.S. & Canada.
- Piling into a relatively narrow sleeve of large-cap U.S. growth stocks was the right approach to beating the broader market throughout the second half of 2021. Looking more broadly over the last ten years, the U.S. was clearly the place to allocate capital as the S&P 500 outperformed the MSCI EAFE (non-U.S. developed markets) nearly 80% of the time over that period.1
- Despite financial markets being roiled by multi-decade high inflation, a hawkish Fed pivot to start the new year and Russia’s invasion of Ukraine this week, the global economy remains on generally strong footing.
- After a decade of U.S. outperformance, especially within a narrow group of mega-cap growth stocks which have benefited from ultra-low interest rates, we may be entering a period where we see greater breadth in global growth.
- History has shown that such periods tend to spur corporate earnings across regions and sectors, creating a wider range of investment opportunities across the globe.
- Given the backdrop of significant geopolitical uncertainty, high inflation, and tighter Fed policy, 2022 may provide an optimal environment for active, skilled managers to leverage their expertise to identify opportunities across a changing economic and inflation cycles.