America’s Decade | Charts that Count

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This has been america’s decade now as anybody who’s been reading the ft recently will be aware it’s almost exactly ten years since we suffered the worst of the financial crisis when lehman went down well there’s been very surprising is that even though that crisis seemed to be based here in the u.s. it’s the us stock market that has done far better than the rest

Of the world now this blue line here shows you the s&p 500 main index of the of the us stock market divided by the msci rest of the world index all world excluding the us and you can see that when we set it there’s a 100 right when lehman went down 10 years ago it is now just this last week finally reached 200 in other words the us has outperformed the whole

Of the rest of the world’s stock markets by double over the last decade which really is quite something now how did it do that a big part of this plainly is q-e as we all know by now the us federal reserve was much more enthusiastic about buying assets which meant that it was propping up american share prices while other central banks weren’t that certainly

Helps explain that great rise during that era of qe there and it also helps explain the rise we’ve seen in the last few months because it also left qe earlier than other banks leading to higher interest rates leading to money being attracted to the us strengthening the dollar strengthening stocks now there’s a second reason many people quote which is what you

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Might call big tech obviously the companies that are doing best these days our technology companies silicon valley is in the states the most successful technology companies tend to be american there is a limit though to how much you should take this to heart because this red line you see here is the s&p 500 excluding tech relative to the rest of the world

And as you can see even if you exclude tech the rest of the american market is pretty much beaten the rest of the world by some 80 percent over the last decade if it was truly a case that technology was doing that all of the gain was down to technology you’d have expected that line to be more than more or less horizontal plainly isn’t now that leads to the final

And perhaps most alarming reason why the u.s. is doing so much better which is the classic battle between greed and fear what we have now rather than a choice between greed and fear is greed excitement here in the us and fear everywhere else there have been far more problems for the rest of the world over this period whether it’s the eurozone crisis here or the

China devaluation here or any number of emerging market crises in this last few months now the problem is that it’s very difficult for greed and fear to co-exist if you see further leaking of money out of the emerging world into the u.s. that will tend to make the conditions for the emerging world all the harder and push them towards a crisis that will leave the

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Us without markets to sell its goods that will hurt the us ultimately so it is hard to see how we can have another american decade unless greed and fear find their way back into alignment once more it’s very hard to see how this can be sustained for another decade

Transcribed from video
America's Decade | Charts that Count By Financial Times

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