Expect end of US dominance in equity returns

The 2020s will be marked by the end of “US exceptionalism” with equities in other developed markets expected to produce better returns than US ones.

According to J.P. Morgan Asset Management global market strategist, Kerry Craig, the 2020 will see the US reduce in dominance when it comes to equity returns despite outstanding returns over the past decade.

“We will see better returns from non-US equities versus US equities and global equities may keep pace more.

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“The 2020s will see the end of US exceptionalism thanks to the end of US monetary policy and softening of the US dollar. There will be dollar depreciation, not necessarily over the next one or two years but over the next 10 to 15 years and this will give more support to Asian asset returns over time.”

US large cap equities had the lowest total return forecast in 2021, in Australian dollar terms, of just 4.2%, down from 5.1% this year. This was lower than all other major regions with Australian equities expecting total returns of 6.3%, in Japan of 6.6% and the Eurozone of 6.7%. Emerging market equities had the highest forecast total return of 7.3% for 2021.

This would be a reversal of the previous decade where equities in the S&P 500 had significantly outperformed every other major market over the last decade.

According to FE Analytics, the S&P 500 returned 395% over the 10 years to 23 November, 2020, compared to 119% by the ASX 200 over the same period. Looking at other major markets, the US had also outperformed Japan, the UK, emerging markets and Europe.

Over the 10 years to 23 November, the Nikkei 225 had returned 173%, MSCI Europe ex UK had returned 157%, MSCI Emerging Markets returned 118% and the FTSE 100 saw the lowest returns of 85%.

Performance of major markets over 10 years to 23 November 2020

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