We've been recommending overweighting the US in global equity portfolios since 2010. We still are, and it is still working (chart).
We started writing about the Roaring 2020s in the US in 2020. For example, on August 11, 2020, we wrote: "We live in interesting, though not unprecedented, times. The Roaring 1920s could be a precedent for the Roaring 2020s. As Mark Twain observed: 'History doesn’t repeat itself, but it often rhymes.'"
The problem is that the latest issue of The Economist has a front cover story titled, "THE ENVY OF THE WORLD: America's economy is bigger and better than ever." The editors could have also titled the story, "US Hard Landing Forecast: Rest In Peace." Front cover stories like this one have often been contrary indicators.
In 2016, Gregory Marks and Brent Donnelly, analysts at Citibank, looked at every cover story from The Economist going back to 1998, selecting those stories that covered “an emotional or hyperbolic portrayal of an asset class or market-related theme.” They selected 44 cover stories that had either an optimistic or a pessimistic point. They found that impactful covers with a strong visual bias proved after one year to be contrarian 68% of the time. That’s high enough to suggest that market watchers should keep the front-cover curse on their radar.
So be bullish, but stay alert. We will continue to help you do so.
