Saturday, December 15, 2007

International Returns for 2007: The Impact of Where You Invest

What we saw in my last post is that U.S. investor performance for 2007 was highly dependent upon the sectors one chose. Financial stocks and consumer discretionary issues posted double-digit losses on the year; energy and materials stocks yielded double-digit gains.

Above we can see that returns have also been highly dependent on where one was invested. The cash S&P 500 Index, as a proxy for U.S. returns, is up about 3.5% on the year. The DAX in Germany, however, has returned about 20.5% over that same period. The year-to-date returns in London's FTSE were only 2.83%, but we saw an eye-popping return of 38% from Hong Kong's Hang Seng Index. Bringing up the rear was Japan's Nikkei, down almost 10% on the year.

What you invest in (sectors) and where you invest (world markets) are every bit as important to performance as when you invest (timing). In my next post, we'll look at the impact of investment style on 2007 returns.

Meanwhile, I note that, since the S&P 500 market top in October, we've lost about 6% in the U.S. index; 1% in the DAX; 5% in the FTSE; 4.5% in the Hang Seng; and 10% in the Nikkei. Offhand, it appears that countries with the weaker currencies and lower interest rates have been lagging their peers recently and during much of the year.