America Is Casey at the Bat

"Who had a better year, mortgage bonds or Barry Bonds? Discuss."

Those old enough to remember baseball's Washington Senators, perhaps now remembered best as the protagonists in Damn Yankees, are old enough to recall the twist on Henry Lee's eulogy to the first President, "First in war, first in peace, last in the American League." Who knew this could be twisted again in reference to the U.S. stock market's performance relative to the rest of the world for the past six-and-a-half years?

Morgan Stanley Capital International, truly a mean, lean index machine, has a set of total-return indices for assorted national markets in both U.S. dollar (USD) and local-currency terms. We will treat all nations using the euro as the single entity of the euro zone. MSCI also has a world index -- a World Series? -- in USD terms going to May 2001, which establishes the starting date of our little study.

Say It Ain't So

The "World Series" has had a period total return of 160%, the horizontal line in the chart below. The various national indices' performance relative to the World Series are sorted in descending order. Only forever-moribund Japan, with a relative performance of 80.01%, trails the U.S. relative performance of 80.04%. Other laggards include other "senior" markets of the euro zone, the U.K. and Switzerland.

Country Index Total Returns in USD Relative to World Index Since May 2001

Click here for larger image.

Source: Bloomberg

The list of outperformers includes the Fab Four BRICs of Brazil, Russia, India and China, a smattering of economies such as Egypt and Pakistan dependent on the repatriated earnings of their citizens abroad, and an assortment of truly emerging markets, led by Colombia.

Factors Driving Performance

Well, you say, a lot has happened in the world since May 2001. We had yet to feel the effects of the Federal Reserve's first rate cuts in January of that year, the dollar was still ascendant against the euro, and the entire global commodity boom was in the future. (I wrote an October 2001 column on the negative macroeconomic signals from declining commodity prices.)

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Howard L. Simons is president of Simons Research, a strategist for Bianco Research, a trading consultant and the author of The Dynamic Option Selection System. Under no circumstances does the information in this column represent a recommendation to buy or sell securities. While Simons cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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