Will Foreign Stocks Beat the S&P in 2014?

Most international stock markets did much worse than the S&P 500 in 2013. Are they following the market’s correction so far this year?

Jan 19, 2014 at 11:31AM

The S&P 500 (SNPINDEX:^GSPC) soared more than 32% in 2013, beating out nearly all of the markets in the rest of the world. But so far in 2014, the S&P hasn't done nearly as well, with the index off half a percent despite having set a new all-time record last week. With U.S. stocks slumping, are international markets following suit? Let's take a close look at whether the S&P 500 is still leading the pack among the world's best-known stock markets.

Stock markets in Europe have had mixed performance so far this year, with some areas seeing surprising strength. In the U.K., major-market benchmarks are up 1%, as encouraging data on retail sales pointing to signs of strength in the British economy. Similarly, German stocks are up even more sharply, gaining about 2% as investors point to recovery from the Eurozone's recession. With Europe having underperformed the U.S. in 2013, many believe that if the economy there continues to improve, European stocks should be able to catch up in 2014.

In 2013, Japan was one of the only stock markets that performed better than the U.S. market, at least in local-currency terms. So far this year, though, Japan has done even worse than the U.S., with the Nikkei falling about 3.5%. Even relative strength in the Japanese yen compared with the U.S. dollar has still left the dollar-denominated iShares MSCI Japan ETF (NYSEMKT:EWJ) down about 1%.

Despite the slow start, many believe that Japan could again lead the world's stock markets higher in 2014. With the government there taking aggressive steps to end decades of deflationary pressure and boost growth at the expense of the local currency, Japan is doing its best to take stimulative monetary and fiscal policy to the next level. If it succeeds, then Japanese stocks have plenty of room before they'll even come close to matching their best levels from the late 1980s and early 1990s.

Emerging markets
After a terrible 2013, emerging markets have once again gotten off to a bad start in 2014, with the Vanguard FTSE Emerging Markets ETF (NYSEMKT:VWO) down 4%. China and Brazil have been particularly weak to start off the year, as many investors once again point to the pressure from Federal Reserve quantitative-easing tapering as affecting emerging-market investment to a greater extent than activity in U.S. stocks. As a result, iShares China Large-Cap (NYSEMKT:FXI) and iShares MSCI Brazil (NYSEMKT:EWZ) have both seen substantial declines so far this year.

It's true that emerging-market economies face some structural challenges that developed-market countries have already dealt with, including the systemic risk of the state-influenced banking system in China and the commodity-dependent economies of Brazil and Russia. Yet compared with the U.S. and other developed-nation stock markets, emerging markets look cheap, and that could spur value investors to take a shot on the sector in 2014.

Most investors still like the prospects for U.S. stocks as a leader in the world markets for 2014. But by being aware of trends around the world, you can take greater advantage of opportunities wherever you can find them.

Invest somewhere
No matter where you decide to invest, it pays to get your money working harder. Millions of Americans stayed out of the market and have missed out on huge gains. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Fool contributor Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information