The U.S. Equity Freight Train: Can Anything Derail it?

As of the close of the third quarter 2018, the S&P 500 index (U.S. Large Cap equities) continued to show dominance over international equity peers. In fact, over the past 10 years, the S&P 500 index has outperformed the MSCI ACWI ex USA index (international equities) in 70% of the calendar years and by 6.2% annualized, the widest margin in the last 20 years.

This performance has caused investors to rightly ask, will the U.S. equity freight train ever stop? History may provide investors some answers.

The Happiness Equation

Guest author Brad Steiman encourages investors to use the happiness model developed in the book, Solve for Happy. As an investor, your happiness depends on having realistic expectations about returns and viewing market events in proper context. These two factors can drive your sense of financial well-being and influence your financial outcome.

Alternative Reality

Diversification has been called the only free lunch in investing. This idea is based on research showing that diversification, through a combination of assets like stocks and bonds, could reduce volatility without reducing expected return or increase expected return without increasing volatility compared to those individual assets alone.