I’m seriously considering a large investment into VXUS at the moment to balance out my portfolio. Obviously, the typical advice is true, time in the market over timing the market etc etc etc
However, it seems like the current Iran situation has been much more damaging for international markets, at least in the short term. So perhaps it’s not the best time.
While the US market has outperformed international markets historically, I’m concerned that the current administration could seriously harm US markets for 10+ years.
A couple reasons:
* Indiscriminate tariffs: this could have a serious impact on trade relations internationally for at least the rest of this presidential term. Even if they end relatively soon, this damages the trust in the US’s largest trade partners. When countries turn to places like China for stability, trade, and finance, it seems unlikely they’ll pivot back to the US immediately.
* Militarism: the actions in Venezuela and Iran definitely do not inspire confidence. The US has taken military actions many times before, but these recent times have been without the support or notice of even America’s closest allies. Seeing the beating that the Gulf countries have taken, it’s possible that the US is no longer seen as a reliable allie, if not a dangerous liability.
* Internal investment/government subsidies: with the exception of AI, I can see the US missing out on emerging technologies like renewables and quantum computing. The lack of investments in infrastructure and institutions could be even more problematic. A decline in the quality of transportation, the electrical grid, public schools, healthcare, and universities could have consequences that reach decades into the future. Every industry is held by these functioning properly.
* Continuing political instability: the current administration may not be a fluke. US politics have become increasingly polarized and extreme for quite some time now. Despotic and incompetent leadership may become more normalized and tolerated.
I’m not trying to make things out to be cataclysmic. But I do see the US in a position of slower growth, at least compared to the rest of the world. The best case scenario is a complete return to normalcy with the next presidential term. That’s several more years of instability. At worst, we’re seeing the start of a slow and long decline of the US as an economic superpower.
Possibility of long term damage to US market
byu/80MPH_IN_SCHOOL_ZONE ininvesting
Posted by 80MPH_IN_SCHOOL_ZONE
24 Comments
Ignore the news, you should always have considered a globally diverse portfolio regardless. It makes no sense to go “all in” on a single country.
Not sure what you are worried about. The US has always been stable but hectic. This isn’t new. Look at how many wars the US has been a part of.
You want to diversify into an international fund and then listed a bunch of reasons for potential lower US market returns. What’s your actual concern here?
Conversations in investing related subs are going to be very interesting 5-10 years from today
The great thing about diversification is that we don’t need to know the future to end up in a good spot.
If U.S. outperforms international – thank goodness we owned some U.S.
If international outperforms U.S. – thank goodness we owned some international
And if they gyrate a whole bunch and end up in about the same place – we end up with better returns and better risk adjusted returns than holding any one asset.
If you know the future with perfect foresight, then invest in the best asset. If you don’t know the future, diversify. Don’t overthink it.
I probably wouldn’t make a rash reallocation to a predetermined strategy. Yes, some in VXUS makes sense, but I wouldn’t go “majority.” The US will do everything, and I mean everything, to protect national interests.
Very rational political argument. As far as how it will affect the stock market, that’s anyone’s guess.
The US has always led the world and will likely continue to do so despite all the current noise.
But if you want to modify your investment strategy based on your own political predictions, that’s your prerogative. I stay the course without paying attention to the noise.
Do you believe that the current regime and their policies will be in place forever?
r/VTandchill
Compare the two going back 5, 10, 20 years. Let us know how that works out for you.
Invest in VT and let the market sort it out ¯\_(ツ)_/¯
– The tariffs have been argued over already so I won’t address that. If they work that bullish. If they cause inflation that’s also bullish.
– Militarism – The US have imposed dozens of regime changes in history. This is nothing new and will help to secure future trade and Safety for the US. Other countries like EU have no reason to outwardly approve of this so that they can have plausable deniability. The US has and clearly continues to be the worlds police. Bullish
– Internal Investment – US is heavily invested in energy infrastructure. As someone in the industry the tariffs are in fact leading to increased production of solar in the US which was previously outsourced to China and India. Bullish. The current energy heavily fueled by natural gas. This is bullish for Energy sector, GEV, ETN, etc. I’m not entirely sure where infrastructure, universities and healthcare are declining. Education rates are at all time highs and new medical breakthrough happen every day.
– Political instability – Sure but this is largely a game they play to keep the sides at each others throats. The US government has a trajectory and that will remain pretty constant from one administration to the next.
As you said, the International market have taken a bigger hit than US due to this war. That is not a coincidence. The US is best positioned in the entire world for higher oil prices and the US stock market and USD continue to be where money goes for safety.
Seems like a good way to lose money lol.
Tariffs: Well, they are stupid. The question is, who else are you going to trade with? The US makes up 33% of global consumption. Cutting off trade with the US will create a depression in most nations.
Military: it’s nothing new, the US has been in countless wars since WWII.
Internal investment: this is nothing new, and isn’t just a US problem.
Political instability: A bit of revisionist history. U.S. politics have always been pretty polarizing, and social media makes it seem far worse. Once again, it’s also not a US issue either.
It sounds like you’re highlighting broader global issues that aren’t just isolated to the US. Could there be a catch-up trade in international markets of course, is America on the brink of collapse that much more than most other developed countries no.
Sounds like you shouldn’t be investing in the market.
If you diversify, you don’t need to be right about any single investment. While your forecast is probably wrong and you’ll wince when you reread it in a few years, VXUS is a great idea.
> imports .. ripped up trade agreements
The U.S. imports a lot but it’s mostly the wealthier consumers. Take Europe. California produces great wine but most is a gathering surplus. Why? U.S. snooty wine drinkers want *European* wine to go with a meal .. because it’s made it Europe. Ferrari laughed the U.S. off knowing *its* American customers want Italian.. not built in Detroit or Cd Juarez across from El Paso TX. Less premium products? Sure a little made in North America, but w/higher income (real or imagined) customers the authenticity has to be there. Even China will probably sell as some small consortiums, say Disney-like pet houses with rotating sparkly features will still sell. Not having pets pampered is a violation of their human rights!! Sell that to Mattel.
Let’s say Germany’s VW brings back the ‘60s era VW Beetle to the U.S. .. the profit per unit isn’t that great anyways. May as well hecho in Mexico when NAFTA III gets signed.
> [geopolitics]
The U.S. does have that 2 large ocean advantage. Saw that recently in the latest gerfukel. Couple ways to look at it where if the U.S. has a safety advantage maybe long term non-US stocks should have a risk premium to return more (but have the non-U.S. indexes hit that turnover point?). However ultimately the non-US factories and buildings are actually under more risk. Then there’s other factors though like legal (aka how do investors get money out of said countries when wanting to sell), ROI (ars stocks allowed to ~~cheat~~ efficiently serve consumers and workers?, etc..
You go ahead and do that..
Long term damage is a certainty. Some parts of the US market won’t be as affected, some will do fine. But overall it’s obvious where this is going, which is a more united non-US market.
VXUS took about a 2 1/2 % hop as you posted this.
Trump will hopefully pass soon. Presidents come and go. The debt will never be paid back. The can will be kicked down the road. Nato ties will come back. America will America. It’s such a huge and innovative country it will get by, and make bank. It’s just while it does.. the regulatory capture continues, muppets drive massive trucks to office jobs as the wildfires get worse. Folk will suck at the teat of biased media. Folk will fall though the cracks due to the lack of safety net. Decent third spaces, walkable communities, good rail transport, and affordable healthcare system will continue to be sold as a pipe dreams despite being common elsewhere. Guns, lack of education and religion will continue to damage people and society daily. But despite a million issues and a country that honestly looks like a stumbling crack head on a 72hr bender right now, I’d never bet against the USA and it’s truffle hunting dog like obsession with making money.
I have been placing more into vxus since September. Not really reducing my US holdings, just any added money going into vxus.
100%
Diversity is the only free lunch. Without conviction, or a strong reason, it’s always better to diversify. Especially during times of uncertainty