Hindsight, they say, is 20/20 and that’s especially true in the world of investing. It’s very easy to survey today’s US bull market and say that people should have been piling into American stocks ten years ago when they were cheap. It was much harder to look at the collapsing US stock market in 2007 and say to yourself, “Now is the time to buy.”
Yet, if you had had the intestinal fortitude to do so, you would be well in the money today. The website How Much recently took a look at what investors would have earned from 15 prominent American stocks if they had invested $1,000 in each back in 2007. This graphic shows the results.
A few things stand out from this chart. The first, obviously, is that Netflix stock has done ridiculously well since 2007. This makes sense since it’s really only in the last 5 or so years that streaming has picked up enough steam to make big TV companies worry. In other words, while it was clear in 2007 that Google and Apple and Amazon were serious businesses, it still wasn’t clear that Netflix was. So, it makes sense that Netflix stock has grown more rapidly than the others in the intervening 10 years as the markets have caught up with consumers changing preferences.
The second thing that stands out is how well US companies have performed overall. With the exception of GE, which has been bedevilled with a range of issues, all the companies shown have delivered a strong performance, with most of them more than doubling in value in just ten years. This is a testimony to the strength of the post-financial crisis bull market.
Spoke to the best and brightest minds of the industry at BSE today…. consensus view, we are not in a bubble. This is a big bull market but don’t be complacent. Stick to quality and don’t buy the euphoria in low quality debt ridden companies even if you are tempted. pic.twitter.com/NXeWUS8QXW
— Sonia Shenoy (@_soniashenoy) January 11, 2018
As you can see, while tech companies performed particularly well, the expansion wasn’t limited to the tech sector – companies like Starbucks and MacDonald’s made a good showing, as did healthcare group Mylan and FedEx (which has been buoyed by the shift to online shopping and the associated need for delivery services).
Unfortunately for today’s investors, however, past performance does not guarantee future results. American stocks have run very hard for the last eight and a half years, and most commentators agree that the good times can’t last forever. While few are predicting a bear market, most agree that US stock market returns will be lower over the next few years, perhaps closer to 2% to 5% a year.
He’s been a perennial bull, but Piper Jaffray’s Craig Johnson thinks the stock market could correct by 20%… soon. https://t.co/zl46MXyxou
— MarketWatch (@MarketWatch) January 11, 2018
For South Africans looking to park cash overseas, this means a conundrum. Many asset managers are predicting that emerging markets (EMs) will outperform developed ones in the next five years, but South Africans need to diversify their emerging market exposure, so investing in other EMs may not make sense. It’s a tricky problem. – Felicity Duncan