Pays to Look Over There

There is obviously no way to know what will happen in the future with this, but I think it makes more intuitive sense to stick with a country whose economy is different than ours, and Western Europe is closer to the U.S. than Australia is.

The Canadian Question

A logical question in this context is: What about Canada? Canada does have potential, and it, too, is commodity-based. During the time period studied in the other charts, Canada, as measured by iShares MSCI Canada (EWC Quote), shared the same decline down and tracked very closely until November 2002. It then outperformed nicely, but was more volatile than Australia.

While I maintain exposure to Canada, it is less compelling to me as a true diversifier due to its proximity to the U.S. economy.