One of the reasons we formed RBA in 2009 was we thought the US was entering perhaps the biggest bull market of our careers. Our view was highly contrarian, to say the least, because the combination of a decade of emerging markets outperforming and the global financial crisis made investors extremely fearful of the US stock market.
Sentiment in the early-2010s was so extreme that people were hesitant to invest with RBA simply because we were too bullish. Our marketing materials at the time discussed what we called “fire extinguishers,” a metaphor for strategies we would employ if the US market imploded.
Even in 2014, five years into the bull market, we wrote an Insights report titled “Are you tired of being scared yet?” in which we highlighted how there was an overwhelmingly bearish consensus by listing 50 different reasons stock market observers cited for avoiding the US market.
Through the past decade, investors have displayed a remarkable shift in sentiment. Cautious investors who refused to invest in US and only wanted “safe” income turned into investors with an unquenchable thirst for the riskiest investments such as meme stocks, speculative small cap tech stocks, SPACs, and cryptocurrencies.
Despite the bear market in these extremely speculative assets, investors today are confused by our willingness to invest outside the US when the investment opportunities outside the US seem to be growing.
When investing internationally, it’s not simply about countries
Investors seem geographically myopic and unaware of a significant shift in the relative performance of some global markets. Whereas investors are waiting for the resurgence of US Technology, Communications, and Consumer Discretionary sectors, world stock market returns have become increasingly competitive to US returns.