The U.S. market trades at an all-time high. It has been a bull market for almost 11 years, whereas historically, whenever the stock market has appreciated for 10 years or so, there will be a market crash like the one we had in 2008.
Yet, 2020 is a presidential year. Some people believe that the market will continue to head higher until after the election because Trump will do everything in his power to keep the market up since he’s going for the seat again. And the U.S. presidential election isn’t until November 3. So, the market could go up another nine months or so.
Historically, in presidential years since 1928, the S&P 500 delivered negative returns in 4 out of 23 presidential years (17%), including:
1932, during the Great Depression, the market was down 8%,
1940, during WWII, the market was down 10%,
2000, the Internet bubble burst, the market was down 9%,
2008, a financial crisis from subprime mortgages in the U.S., S&P 500 declined 37%
Market corrections are scary. And who knows if this market correction will turn into a market crash with all the uncertainties in the global economies … Brexit, trade tensions, global growth slowdown, etc.
A Quick Overview on Global Economies
The European countries’ economies look like it could be falling apart with the unemployment rates in France, Italy, and Spain sitting at about 9%, 15%, and 10%, respectively.
Gross domestic product (“GDP”) is a monetary measure of the market value of all the final goods and services produced in a period of time.
Here’s a comparison of the 2017 GDP of the 3 countries:
Germany and the U.K. are doing OK with recent unemployment rates of +3% and +4%.
Note that the combined 2017 GDPs of Germany, the U.K., France, Italy, and Spain was about 10.8 trillion, which was about 56% of the U.S.’s GDP. Still, if Europe’s economy falters, there’s going to be a ripple effect. Read More
The market is in its nine-year bull run. I’ll use the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and iShares S&P/TSX 60 Index Fund (TSX:XIU) as representations of the markets, respectively.
The annualized market returns have been about 9.5% for the U.S. market and about 7% for the Canadian market.
It’s not surprising that the U.S. market has outperformed the Canadian market in the long run because the U.S. market is much more diversified, while the Canadian market is usually weighed down by commodity stocks, including mining companies and oil and gas producers.
All this means is that investors need to be extra careful in picking the right prices to buy those companies or the Canadian market.