Comparing the Returns of Commodities and U.S. Stocks : Chart

U.S. stocks outperformed commodities in the past five years. As an asset class, commodities are always more volatile than stocks and are not suitable for most investors. Though there are many commodity derivative products such as ETFs that make investing in commodities easier, investing in commodities is not for everybody.

The following chart shows the returns of commodities and US stocks:

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Source: Will You Miss the Commodity Comeback? by Christopher Gannatti and Florian Ginez, WisdomTree


When Markets Dip, Don’t Drop Out: Infographic

One of the themes I have discussed many times on this blog is the futility of market timing. Success with equity investing involves holding stocks for the long-term which includes periods of bull markets and bear markets. The following updated infographic from Schwab shows the difference in returns between three types of investors:

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Source: Charles Schwab

10 Stocks To Monitor And Add As Markets Wobble

US equity markets fell yesterday with the Dow down 1.68% and the S&P 500 off by 1.33%. After a few years of smooth sailing investors are suddenly facing the gyrations of a volatile market. A myriad of reasons are being thrown around for the shift in market directions including rising interest rates, valuation concerns, extreme speculation driven by investors’ fascination with crypto currencies and marijuana stocks, sky-high margin debt, etc. The cause of yesterday’s fall was apparently Trump’s plan to slap tariffs on steel and aluminum imports.

Day-today market movements are more of a worry for short-term traders than long-term investors. Instead of focusing on the daily movement of markets, long-term investors can patiently wait, monitor and take advantage of cheaper prices. When there is heavy selling usually quality names also gets thrown out the window. So astute investors can grab stocks at attractive prices when everyone else is dumping.

Listed below are ten stocks from different sectors with their current dividend yields. Investors can track and add these companies after further research. It is also important to remember that adding in phases is a smart move than going all in at once.

1.Company: General Mills Inc (GIS)
Current Dividend Yield: 3.88%
Sector: Food Products

General Mills fell from over $70 early last year to $50.57 yesterday. More recently the stock traded around $60. The current decline was attributed to the company’s expensive acquisition of pet food marker Blue Buffalo.

2.Company: Canadian National Railway Co (CNI)
Current Dividend Yield: 1.84%
Sector: Railroads

Despite decent earnings past quarter. the stock has barely moved strongly. As one of Canada’s two railroads with extensive network in the US market CN is always a long-term buy especially when it is on sale.

3.Company: Kimberly-Clark Corp (KMB)
Current Dividend Yield: 3.61%
Sector: Household Products

4.Company: Fomento Economico Mexicano SAB de CV (FMX)
Current Dividend Yield: 1.46%
Sector: Beverages (Nonalcoholic)
Country: Mexico

5.Company: Eni SpA (E)
Current Dividend Yield: 5.52%
Sector:Oil, Gas & Consumable Fuels
Country: Italy

6.Company:Diageo PLC (DEO)
Current Dividend Yield: 2.54%
Sector: Beverages
Country: UK

7.Company:Consolidated Edison Inc (ED)
Current Dividend Yield: 3.82%

8.Company: Church & Dwight Co Inc (CHD)
Current Dividend Yield: 1.77%
Sector:Household Products

9.Company: Valeo SA (VLEEY)
Current Dividend Yield: 2.16%
Sector: Auto-parts
Country: France

10.Company: BASF SE (BASFY)
Current Dividend Yield: 3.18%
Country: Germany

Note: Dividend yields noted above are as of Mar 1, 2018. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long GIS, CNI

A Comparison of U.S. and Canada Equity Market Returns

The Canadian stock market has been one of the worst performing markets in the world in the past decade according to a recent article in The Globe and Mail. One of the main reasons from the poor performance of Canadian stocks relative to their American peers is the global crash in commodity prices. From the article:

The stock-market correction was made in America, then promptly exported to Canada. Overheated U.S. stocks were the starting point for a week of unnerving market tumult, which quickly turned into an indiscriminate global sell-off sparing no major market.

Canadian stocks were hardly due for a major slump, but were punished regardless in a return to an unwelcome but familiar form.

Already badly trailing the rest of the world, the latest setback in domestic equities has dragged the S&P/TSX composite index into negative territory since the precrisis peak nearly 10 years ago.

-Not counting dividends, the main Canadian benchmark is now trading below its 2008 peak just prior to the onset of the global financial crisis.

As the U.S. stock market was transformed into a madhouse of volatility, the cross-border transmission of fear has dragged the S&P/TSX composite down by 5.2 per cent over the past week or so.

For Canadian investors, it has been a smoother, slightly shallower decline, as the domestic losses haven’t been quite so drastic, and the swings in U.S. benchmarks not quite so violent here.

But Canadian stocks may have been less vulnerable to a correction simply because they lagged  so badly up to that point, sitting out what has been a powerful uptrend in stock prices almost everywhere but here.

Source: Dead last: As Canadian stocks lag, long-term returns prove paltry, The Globe and Mail

Many investors, including myself, may not know how much Canada has under-performed US in the past few years. So I compared the performance of S&P 500 and the TSX composite Index in different time periods.

The chart below shows the performance of S&P/TSX Composite vs. S&P 500 in the past 5 years:

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10-Year return chart:

Source: Yahoo Finance

The above charts show the magnitude of difference in returns between the markets. The takeaway for Canadian equity investors is that diversification beyond home markets is important.

Related ETFs:

  • SPDR S&P 500 ETF (SPY)
  • iShares MSCI Canada Index Fund (EWC)

Disclosure: No Positions

Relative Sizes of Global Equity Markets 1899 vs. 2017

The Credit Suisse Global Investment Returns Yearbook 2018 has been published recently. The summary edition of this annual study contains a few fascinating charts. The following chart shows the Relative Sizes of Global Equity Markets end-1899 vs. end-2017:

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Source:The Credit Suisse Global Investment Returns Yearbook 2018 , CS


US Stock Valuations Are High Compared To Global Stocks

US stocks have had a multi-year bull market until recently. Even after the recent shakeup stocks have recovered and are again rising strongly. However in terms of valuations, American equities are expensive relative to their foreign peers. While US stocks have always enjoyed a premium over other developed markets, in terms of performance US stocks and global stocks take turns every few years. Or to put it another way, in some years US outperforms other developed markets while in other periods, other markets beat the US market.

Global stock are attractive relative to their US peers from a valuation perspective. From a recent article at Hartford Funds:

An Open Call

Movie producers aim to discover and groom a young actor or actress before he or she becomes a big star. The same goes for investors looking to buy equities. (FIGURE 4).
After taking their valuations into consideration, EM and developed markets (DM) appear to be inexpensive when compared with their US equivalents. Add in their dividend growth and dividend yield, and it may potentially be worth taking another look at these regions.


Global Equities Characteristics(12/31/2017)


Based on the percent of total holdings of the MSCI ACWI Index. Data Source: FactSet, 1/18. Estimates are subject to change.

 Tomorrow’s Marquee Names?

Paying too much to hire a big name star, who ultimately fails to put people in seats, is a regular occurrence in Hollywood. Sometimes the less-hyped talent end up surprising everyone. Likewise, the developed markets with higher country returns may not be what many would expect (FIGURE 5).

While returns have generally been strong across the board, many other countries fared as well or better than the US. Surprisingly, other countries typically associated with being some of the world’s economic generators also returned less. They had forward Price/Earnings (PE) ratios9 higher than less expensive countries that provided better returns over the past year. That means those big name markets are predicted to cost investors more, but may offer less in returns.


International Markets Have Offered Attractive Valuations

1-Year Performance and Forward P/E Ratios


Data Source: FactSet, 1/18. As of 12/31/17. Performance data quoted represents past performance and does not guarantee future results. Returns and P/E based on the individual region/country returns of the MSCI ACWI Index. Countries listed by market-cap size. A simple average was used to calculate the return and P/E for countries in the “Other” category. Country portfolios are capitalization-weighted with free-float market cap. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes, or transaction costs. MSCI performance is shown net of dividend withholding tax. Index is unmanaged and not available for direct investment. Please see the back page for representative index definitions.

Source: A Reboot for International Equities, Hartford Funds, Jan 2018

The complete article linked above is worth a read.