The underlying assumption of future subpar ex US is that the world equity markets currently and will continue to overvalue ex US markets. However I’m not sure anyone who makes that implicit assumption will admit to it.I wasn’t referring to Japan’s real estate market, I was referring to their equity marketsIf you're referring to the state of Japan in the 1980's I wouldn't have considered them low risk with their absurdly high exposure to real estate. They had a big incentive to invest outside of the country.Flaw: Japan in the 1980s. Japan has plenty of international exposure and is 60% of world market cap weight. No authoritarian government. Fairly isolated from other geopolitical risks.VTI has plenty of international exposure for me as many of its companies have large international operations. Both Europe and east Asia have large authoritarian governments making aggressive moves and the Suez Canal is currently avoided by much shipping so VTI is as much geopolitical risk as I’m willing to take currently.
I can't think of a country currently I'd consider less risky than the U.S. WITH an equivalent opportunity for equity growth. I'm open to suggestions. Feel free to extrapolate out 5 to 10 years to find such a country.
Also curious whether Bogleheads care about geopolitical risk when investing ex-US. Pax Americana is not what it was so referring to the decades after WWII to the present is only partially relevant. Safe and efficient transportation has contributed greatly to world GDP growth and if that comes into question along with economically important countries (obvious case is Taiwan) safety from outside attack, so does global growth.
If the US is less risky, their equity valuations rise, and return expectations fall accordingly.
There’s no free lunch of higher return and less risk (although it may seem that way for a period of time as valuations rise)
Also as to the argument that the US has ex US business with US companies, I would assume that means ex US earnings within US companies are valued at higher multiples than similar ex US earnings in ex US companies, which is interesting and a bit mind bending.
Statistics: Posted by JBTX — Mon Jun 03, 2024 11:39 pm — Replies 6134 — Views 1598829