Parsing Yesterday’s Stock Market Slide

Oct 11 12:10 2018 Print This Article

No one knows if yesterday’s 3%-plus plunge in US equity prices is noise or the start of an extended decline. What we do know is that the slide wasn’t entirely unexpected given the strong relative and absolute performance of US stocks in recent history.

As noted in Monday’s review of global markets through an ETF lens, equities in the US have been on a tear lately. As of last week’s close, Vanguard Total Stock Market (VTI) was up more than 14% for the past year vs. a roughly flat performance for foreign stocks in developed markets (Vanguard FTSE Developed Markets ETF (VEA)) and a roughly 10% loss for emerging-markets equities (Vanguard FTSE Emerging Markets ETF (VWO)), as of Oct. 5.

Longer-run windows also show a dramatic edge for US equities. For the trailing three-year window, for instance, VTI is still up sharply (annualized 11.1% return) vs. VEA and VWO (+2.6% and +1.9%, respective), even after yesterday’s rout.

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About Article Author

The Capital Spectator

CapitalSpectator.com is a finance/investment/economics blog that’s edited by James Picerno. The site’s focus is macroeconomics, the business cycle and portfolio strategy (with an emphasis on asset allocation and related analytics). In late-2009, the Eastern Economics Journal named Picerno as one of the nation’s “top economics bloggers”. Picerno is the author of Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor (Bloomberg Press, 2010) and Nowcasting The Business Cycle: A Practical Guide For Spotting Business Cycle Peaks (Beta Publishing, 2014). His articles on finance and economics have appeared in a variety of publications and news outlets over the years, including The Atlantic, Financial Advisor, BankRate.com, HorsesMouth.com, and Bloomberg Briefs: Economics. He also pens a daily economics column for the Saxo Group’s TradingFloor.com web site. Picerno has been writing about investing and macroeconomics since the early 1990s at Bloomberg, Dow Jones and other media groups before becoming an independent writer/analyst in 2008. He also offers consulting services on asset allocation and portfolio strategy, the US business cycle, and related data analytics in R and Excel.

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