A transformational shift is taking place within the U.S. economy. Our world has become a place where people, businesses and economies are increasing interconnected. The rapid growth in emerging markets has created an export boom for U.S. companies. These exports have made a historically high contribution to our current economic recovery. After every recession since World War II, the U.S. economy has relied on domestic consumer spending and housing to revive our economy. Not this time. During our current recovery, housing and consumer spending have not been the key economic drivers they usually are despite very accommodative monetary policy. Exports have led the way. This could represent a realigning of the U.S. economy that could bode well for the future. This could lead to a rebirth of the manufacturing sector that would fuel considerable investment and job creation. In my opinion an economy that is more focused on making things that the world wants to buy and less reliant on us going to the shopping mall and buying Mc Mansions is a good thing. Oh by the way, job and wealth creation of this sort will also benefit the traditional domestic growth engines of consumption and housing.
Certainly, many U.S. corporations are embracing these trends. Approximately one quarter of S&P 500 companies generate more than half of their income from outside of the U.S. – and for good reason: over the last 20 years, “more global” companies (those with more than 50% of their income outside the U.S.) have outperformed “less global” companies (those with less than 50% of their income outside the U.S.).1
So what does this all mean from an investment perspective? Get global. In the future, investors will need to recognize that U.S. companies that have a greater exposure to exports and manufacturing may prove to better investments that those focused on the domestic consumer. Think like a global U.S. company and go where the growth is. Asia has more consumers than Europe, North America, Latin America and Africa combined.1 Therefore, in addition to owning global U.S. companies, you should consider allocating a sizable portion of your portfolio outside the U.S. and particularly in the emerging markets. The majority of investments opportunities lie outside the U.S. At the end of 2009, the U.S. represented less than a third of the world’s equity investments.1 The world will continue to shrink and become more intertwined at every turn. This represents an enormous opportunity for global minded investors.
1.Franklin Templeton Investments, Global -The New Core, 2-2011
Damien helps individuals invest and manage risk. He is a CERTIFIED FINANCIAL PLANNER™ professional and a principal of Walnut Creek Wealth Management. These are the views of Damien Couture, CFP® and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Your comments are welcome. Damien can be reached at 925-280-1800 x101 or Damien@WalnutCreekWealth.com.
Leave a Reply