The acronym BRIC — standing for Brazil, Russia India and China — was reportedly first coined by Goldman Sachs (NYSE:GS) chair Jim O’Neill in 2001. And in the last decade or so, the focus on emerging-market opportunities has defined much of Wall Street.
In the boom times, these high-growth regions were brimming with vigor. And in the tough times, these up-and-coming economies were still seeing growth.
So, what nation’s investments would have served you best since the financial crisis and resulting crash in global capital markets? As it turns out, the good ol’ U.S. of A.
Click to EnlargeTake a look at this chart of some of the major markets and how they have performed since 2009.
The S&P is up over 50%. Second best is also a surprise — Germany’s DAX with over 40% gains.
London’s FTSE comes in third with about 27% gains. After that it’s Australia’s ASX 200 with 17%, Shanghai with 10% and the Nikkei in Japan, which is flat.
Click to EnlargeThe short-term performance is very much the same, too. This YTD chart shows the DAX in the lead with 18% gains and the S&P second with 12% upside so far in 2012. Australia and Japan come in at about 7% gains this year, with the FTSE up 3% and Shanghai about 6% in the red.
What gives? A few things, in my mind:
Stability of American Assets: The relative stability and quality of U.S. assets may not be apparent if you lost a bundle during the downturn. But comparatively, we are by the far the safest market globally, thanks to dominant businesses in every sector.
In a crisis, investors concerned with capital preservation abandon riskier assets in exchange for ones they think are the most stable. The high-risk but high-growth opportunities in China, for instance, fell out of fashion in a hurry as investors ran for cover in bulletproof consumer staples like Procter & Gamble () and utility stocks like Southern Co. (NYSE:SO).
U.S. Economy Is Global by Design: It’s also important to acknowledge the global nature of U.S. corporations like Coca-Cola (NYSE:KO) and General Motors (NYSE:GM) that do big business overseas. Though a change in the S&P indexing during the 1990s excluded non-U.S. companies from the index, it’s naïve to think this market measure is tied only to American economic activity.
Same thing for Germany, too. Many companies in the DAX, including Bayer (PINK:BAYRY), Volkswagen (PINK:VLKAY) and Siemens (NYSE:SI), clearly have big operations abroad, including right here in the States.
It’s All About Weighting: This should go without saying, but the S&P is not a true measure of every corner of the American economy. For instance, did you know that Apple (NASDAQ:AAPL) actually has more influence on the S&P 500’s daily performance than the entire telecom or utility sector? It’s true!
As a market-cap-weighted index, the biggest companies have more pull. Right now, tech makes up about 20% of the entire index, with financials in second with 15%. (See for yourself on S&P’s own website.) Thus, the outperformance of a few big American tech stocks — like, oh, … Apple! – can significantly alter the S&P.
Of course, these are just the major indexes, so there may be a few smaller markets skewed into outperformance by some outliers. Consider InvestorPlace writer Dan Burrows’ analysis last year of the world’s best performing markets, which put the Philippines and Indonesia on top of the U.S. Or if you really want to get nuts, include the minuscule markets of Sri Lanka and Iran that put up huge 2010 gains.
But the bottom line is that if you’re looking for equity exposure to grow your nest egg, there’s no need to get kinky with foreign-traded stocks or exotic country-based ETFs. Plenty of opportunity is waiting right here in your own backyard — often at a lower cost, with strict SEC oversight and with fewer complications in getting reliable information.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.
