How do US equities actually stack up?
Reflecting popular opinion that North American equities had a stellar year in 2017, research by Money Management has found that the US Equity sector has fairly consistently outperformed its Australian counterpart since the Global Financial Crisis (GFC).
The graph below illustrates the extent to which, with the exception of some small blips during the recovery from the GFC and European Sovereign Debt Crisis, the US equity market outperformed Australia’s.
Over the 10 years to 31 January, 2018, the US equity sector delivered annualised performances more than double the Australian equivalent’s average. It returned 10.3 per cent as compared to 5.01 per cent. This trend continued over shorter time periods too; the US Equities sector returned 19.88 per cent over five years while the Australian Equity sector delivered 8.73 per cent, and 13.69 per cent over three years while Australia recorded 7.16 per cent.
In the year to 31 January, 2018 the US sector didn’t double its Australian counterpart, but still outperformed it by 5.48 per cent.
Data from FE Analytics also revealed that positive sentiment toward US equities was well-founded, with both the top-performing funds, index and sector average all delivering excellent returns.
As the table below shows, the BetaShares Geared US Equity Currency Hedged fund was the best performer in the year to 31 January, 2018, delivering returns of 56.28 per cent. The BT Wholesale American Share fund had the highest returns of non-geared active funds at 18.03 per cent.
The other top performers in the sector were all exchange-traded funds (ETFs).
|
Year returns of funds in US Equities sector |
|
|
Fund |
One-year returns to 31/01/18 |
|
BetaShares Geared US Equity Currency Hedged |
56.28 |
|
BetaShares NASDAQ 100 ETF |
27.91 |
|
VanEck Vectors Morningstar Wide Moat ETF |
27.41 |
|
BT Wholesale American Share |
18.03 |
|
UBS IQ MSCI USA Ethical ETF |
17.52 |
|
Vanguard US Total Market Shares Index ETF |
17.40 |
|
BlackRock iShares S&P 500 ETF |
17.30 |
|
SPDR S&P 500 ETF |
16.11 |
|
BetaShares FTSE Rafi U.S.1000 ETF |
12.36 |
|
BlackRock iShares S&P Mid Cap ETF |
9.52 |
|
BlackRock iShares Russell 2000 ETF |
9.16 |
|
BetaShares S&P 500 Yield Maximiser |
8.88 |
|
BlackRock iShares S&P Small Cap ETF |
8.49 |
|
THB US Micro Cap |
8.31 |
|
ETFS S&P 500 High Yield Low Volatility ETF |
3.17 |
|
Source: FE Analytics |
|
The low performers were very low however, suggesting that investment in the sector is not without risk.
The sector average and FTSE North American index were nearly identical for returns for the year, at 17.94 and 17.91 per cent respectively. This would be expected considering the high proportion of ETFs in the sector.
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