This is an excerpt from our latest video, Investing Trends in 2020 and Where to Invest with Lynn Dolan at ETFguide and Dave Mazza at Direxion Investments.
Lynn: As we head into a new decade, the market is already taking shape and new investment themes and trends are starting to take shape.
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“It’s wise to remember that too much success in the stock market is in itself an excellent warning,” once quipped Gerald Loeb. After nine consecutive yearly gains, it’s fair to say that our generation has enjoyed more than its fair share of stock market success.
But someday very soon,
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The total U.S. stock market has gained over 20% during the past year and is doing great. But for U.S. investors that are under-weighted to foreign stocks, it’s not so great. Why? Because foreign stocks have convincingly outperformed U.S. equities, thereby causing a performance deficit. What’s the problem?
The tendency of investors to concentrate and tilt their stock and bond holdings toward their home country is referred to as “home-bias investing.”
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If you asked a thousand different people about the key factors that should drive their investment choices, you’re bound to get a thousand different answers.
Some, for example, might be inclined to argue that U.S. stocks (NYSEARCA:SCHB) have increased for eight consecutive years and there’s no reason to make any portfolio changes because stock prices are still rising.
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Never mind the abysmal results of first quarter earnings for the depressed energy sector. It doesn’t matter.
And never mind the conventional wisdom of group-think and scary analyst warnings like, “Energy stocks are in deep trouble because Q1 losses will mark the first time any sector in the S&P 500 has reported an aggregate loss since Q4 2008.”
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