It's a big world with lots of investment opportunities. We continue to favor the United States, but it's hard to overweight the US when it already accounts for 64.7% of the market capitalization of the All Country World (ACW) MSCI (chart). That's up from a low of 42.0% in late 2009.
We can also observe the outperformance of the US by tracking the ratios of the US MSCI stock price index to the ACW ex-US MSCI stock price index in both local currency and in US dollars (chart). Both remain on solid uptrends even though the US has been a global underperformer so far this year, especially in dollars.
As we've noted before, the forward earnings of the US MSCI has been outperforming the rest of the world's forward earnings since the end of the Great Financial Crisis (chart). It is still doing so, which is why the US has outperformed in previous years.
