International Stocks vs. US Stocks in 2018: A Comprehensive Analysis

In 2018, investors around the world were faced with a crucial decision: should they invest in international stocks or stick to US stocks? This article delves into the key factors that influenced this decision, providing a comprehensive analysis of both international and US stock markets in 2018.

Market Performance in 2018

In 2018, the US stock market experienced a tumultuous year. The S&P 500, a widely followed index of large US companies, saw significant volatility, with a total return of around 6%. However, this was a stark contrast to the previous year, when the index surged by nearly 30%.

On the other hand, international stocks, particularly those in emerging markets, performed exceptionally well in 2018. The MSCI Emerging Markets Index, which tracks the performance of emerging market stocks, returned around 31% for the year, significantly outperforming the US market.

Factors Influencing Stock Market Performance

Several factors contributed to the contrasting performance of international and US stocks in 2018. Here are some of the key factors:

1. Economic Growth

One of the primary reasons for the strong performance of international stocks, particularly in emerging markets, was robust economic growth. Countries like China and India, which are major emerging markets, experienced significant economic expansion in 2018. This growth fueled demand for their stocks, leading to strong returns.

In contrast, the US economy grew at a moderate pace in 2018, with GDP growth of around 2.9%. While this was a solid performance, it was not as impressive as the growth seen in emerging markets.

2. Currency Fluctuations

Currency fluctuations also played a significant role in the performance of international stocks. In 2018, the US dollar weakened against many major currencies, making international stocks more attractive to US investors. This was particularly true for emerging market stocks, which tend to be more sensitive to currency movements.

3. Valuations

Another factor that influenced stock market performance was valuations. At the beginning of 2018, US stocks were trading at relatively high valuations compared to international stocks. As a result, some investors turned to international stocks, which were trading at more attractive valuations.

Case Studies

To illustrate the performance of international and US stocks in 2018, let's consider two companies: Apple Inc. (AAPL), a US-based technology company, and Tencent Holdings Ltd. (TCEHY), a Chinese internet and social media company.

In 2018, Apple's stock returned around 28%, while Tencent's stock surged by nearly 70%. This highlights the significant outperformance of international stocks, particularly in emerging markets, compared to US stocks.

Conclusion

In 2018, international stocks, particularly those in emerging markets, outperformed US stocks. This was driven by factors such as robust economic growth, currency fluctuations, and attractive valuations. While the US stock market still offers many opportunities, investors should consider diversifying their portfolios with international stocks to capitalize on the potential for higher returns.

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