You know that old karmic saying, “What goes around comes around?”
Well, in the world of global stock investing in 2014, it was the U.S. stock market that attracted the attention of stock market bulls, alongside a handful of markets in Asia and the Middle East.
Meanwhile, once-robust global stock market performers such as Germany, the United Kingdom and Latin America all had a bearish go around in 2014 — proof once again that investors readily shift to the markets where the money is.
In 2014, the global capital merry-go-round was especially concentrated in the handful or so of the biggest winning countries.
Only nine markets out of the 46 (including the United States) that I monitor daily at my firm, Global Guru Capital, generated double-digit percentage gains this past year. That was by far the lowest number since 2011, when the United States was the only stock market in the world to eke out a gain.
Another result of this concentration of capital was that 28 of the 46 markets — over 60% — actually finished the year in the red.
Europe was particularly weak, with all but two markets — the iShares MSCI Denmark (EDEN), with a total return in 2014 of 7.85%, and the iShares MSCI Belgium (EWK), with a slight 0.63% total return for the year — ending in the minus column. Latin America fared even worse, with no market able to end 2014 in the black.
Meanwhile, the United States, as measured by the Vanguard Total Stock Market ETF (VTI), finished in the top 10 (eighth this year) for the third time in the past four years. This makes the U.S. stock market the most consistent performer on the planet over the recent past.
For all the handwringing about the U.S. economy in decline, this confirms that, as far as the rest of the world is concerned, the United States has remained a bullish beacon for global investment capital.
The Best of the Best
Topping the 2014 global market merry-go-round was the WisdomTree India Earnings ETF (EPI), which rose 27.84% for the year. Undoubtedly, one of the primary drivers of the Indian equity market was the election of pro-business reformist Prime Minister Narendra Modi. His promises of turning India’s bullish demographics and tech-savvy workforce into an economic success story made this market the biggest star of 2014.
Other big winners for the year include the iShares MSCI Philippines (EPHE), +22.09%, iShares MSCI Turkey (TUR), +15.76%, iShares MSCI Thailand (THD), +15.50%, and Market Vectors Indonesia ETF (IDX), +14.50%.
|Name||Ticker||Total Return 2014|
|WisdomTree India Earnings ETF||EPI||27.84|
|iShares MSCI Philippines||EPHE||22.09|
|iShares MSCI Turkey||TUR||15.76|
|iShares MSCI Thailand Capped||THD||15.50|
|Market Vectors® Indonesia ETF||IDX||14.50|
|Market Vectors® Egypt ETF||EGPT||13.62|
|iShares MSCI New Zealand Capped||ENZL||12.60|
|Vanguard Total Stock Market ETF||VTI||12.54|
|iShares China Large-Cap||FXI||11.45|
|iShares MSCI Denmark Capped||EDEN||7.85|
In all, six of the top-10-performing global equity markets were in Asia, with the iShares China Large-Cap (FXI) weighing in with an 11.45% total return.
While the market’s upward move in China was strong, and a very welcome shift from the underperformance there during the recent past, the irony is that this fund wasn’t even the best China-based market in 2014.
Truth be told, the top-performing global market last year is one that I hadn’t even tracked: the China A-shares market. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR), a fund that tracks the performance of China’s A-share stocks that trade on the Shenzhen and Shanghai Stock Exchanges, was up 51.31% in 2014.
And that’s because at the start of 2014, these markets still literally were off investors’ maps. New trading rules in the fall of 2014 opened up the China A-shares market to non-Chinese investors, and this caused the market to soar in the final two months of 2014. And while we’re unlikely to see a repeat performance in the A-shares market in 2015, the money merry-go-round looks like it’s not ready to jump off the China A-shares horse just yet.
The Bottom of the Barrel
Claiming the dubious distinction of markets dwelling at, or near, the bottom of the 2014 performance list were some familiar losers, as well as many countries suffering from the precipitous plunge in oil prices.
Stocks in the political and debt-ridden basket case that is Greece once again suffered a huge sell-off in 2014. The Global X FTSE Greece 20 ETF (GREK) was nearly the worst-performing fund I track, down 39.96% for the year.
While that decline was ghastly, the hideous sell-off was easily eclipsed by the biggest loser of all in 2014, the Market Vectors Russia ETF (RSX), which cratered some 47.22% for the year.
And while we’d like to think that this was all comeuppance for Russia’s adventurism in Crimea and Ukraine, it was more 2014’s second-half plunge in oil prices that pummeled the petrol-based Russian equity market. And if oil prices remain at 5-1/2-year lows, and particularly if crude prices continue their descent, Russian equities will likely pick up where they left off in 2014.
That said, while Russia is admittedly a mess, the global equity market merry-go-round has a tendency to turn wounded bears into bucking bulls.
|Name||Ticker||Total Return 2014|
|Market Vectors® Russia ETF||RSX||-47.22|
|Global X FTSE Greece 20 ETF||GREK||-39.96|
|Global X MSCI Portugal 20 ETF||PGAL||-33.36|
|Global X MSCI Nigeria ETF||NGE||-32.23|
|Global X MSCI Colombia ETF||GXG||-26.88|
|Global X MSCI Norway ETF||NORW||-23.55|
|iShares MSCI Austria Capped||EWO||-20.93|
|Market Vectors® Poland ETF||PLND||-17.55|
|iShares MSCI Brazil Capped||EWZ||-15.52|
|iShares MSCI Chile Capped||ECH||-14.75|
Other notable cellar dwellers in 2014 include the Global X FTSE Portugal ETF (PGAL), which tumbled 33.36% during the year chiefly due to major woes with the country’s banking giant Banco Espírito Santo. Nigeria, Columbia and Brazil also were hurt as a result of tumbling oil prices.
The Headwind against Global Investing
At this point, you might be tempted to throw in the towel on the whole global investing game. After all, it seems that the U.S. economy is now the belle of the global investing ball. And why risk your hard-earned money in far-off places if you can’t even generate big gains?
Let me remind you of one caveat.
The one big culprit behind the lousy performance of global stock markets this year was the remarkable strength of the U.S. dollar.
Back in June, the U.S. stock market was ranked in the middle of the global stock market pack. And since then, it has been the strength in the U.S. dollar over the past six months, up 13.3% as measured by the PowerShares DB US Dollar Bullish ETF (UUP), that has allowed the U.S. markets to look as good as they have.
With the euro now trading at a nine-year low vs. the Greenback, it’s hard for any European markets to look good. As for Russia, the collapse in the value of the ruble corresponds closely to the decline in the value of Russia’s equity market.
So it’s no surprise why the merry-go-round of investing settled on the United States in 2014.
Whether this “exorbitant privilege” continues remains to be seen.
In case you missed it, I encourage you to read my e-letter column from last week revisiting the myth of America’s decline. I also invite you to comment in the space provided below.
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