U.S. Versus International Stock Performance

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U.S. stocks have handily outperformed their global peers over the past few decades, as well as in the post-World War II period. We document the scale of the outperformance and ask whether it can continue.

Over the last 20 years, U.S. stocks and bonds have meaningfully outperformed their global peers, both in absolute terms and on a risk-adjusted basis. The chart below shows the average annualized excess returns1 of different asset classes, plotted against their annualized volatility.

The returns of international asset classes, outlined in red, are shown in U.S. dollar terms. Points to the upper left of the chart are preferable, because they have both higher excess returns (y-axis) and lower risk (x-axis). It is clear that the international asset classes are in all cases far removed from the upper-left-most points of the figure.