“Spanning the globe” was not just a saying from Jim McKay’s opening to ABC’s Wide World of Sports. It is also what you should be doing when researching positions for your portfolio. The U.S. still has plenty to offer an investor. As for the rest of the world, well it should not be ignored or slighted. At one time the rest of the world was not so interesting a story as the U.S. That has changed and is still changing.
Losing weight
In 1970 the U.S. made up approximately 65% of the world’s total market value. According to the World Federation of Exchanges (WEF), as association of the 51 largest stock exchanges around the world, as of April 2009 the U.S.’s total market value in the world sits at approximately 34%. That is some significant weight loss. If you do not believe their numbers, Forbes magazine conducts an annual survey of the world’s 2,000 largest companies and the results are more drastic. Of the 2,000 largest companies in the world only 551 (27%) are in the U.S. That means the rest of the world makes up the other 73%.
Running for the door
The corporate diet the U.S. has been on is not a new fad. The U.S. has been losing industries for decades. Look where your clothes, appliances, and toys are made. Making a mad dash to overhaul your portfolio would not be the worst idea. The long-term growth prospects in the world are not in the U.S. they are overseas.
So, who has been gaining weight
Again, according to the WEF the world approximately breaks down by market value as follows:
- 34% – U.S.
- 24% – Europe
- 15% – Emerging Markets
- 9% – Japan
- 8% – China
- 4% – Pacific ex Japan
- 3% – Canada
- 2% – Australia
- 1% – Africa and Middle East
As the U.S. sheds market value weight (unfortunately not average weight of resident) the rest of the world is gaining.
