The world is transitioning to clean energy at a rapid pace. Many countries are planning to reduce their carbon footprint. As the transition to a newer world gains traction the demand for clean energy commodities would go up. The traditional fossil fuel-based automobiles are increasingly replaced by electric vehicles. Coal powered electric power plants are getting shutdown and replaced by renewable energy produced from sources such as solar or wind. The commodities needed for the transition to clean energy are concentrated in a handful of countries.

The chart below shows the top three producers of clean energy metals – Copper, Nickel, Cobalt, Rare Earths and Lithium.  Chile is the world’s largest copper producer but the country just recently elected a leftist leader. Similarly the Democratic Republic of Congo is the top producer for cobalt. Australia is a top lithium producer but 70% of the world’s Lithium reserves are found in the Lithium Triangle formed in an area at the intersection of Chile, Bolivia and Argentina.

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Source: 2021 IN CHARTS, Mirabaud Asset Management

International stocks offer investors the benefit of diversification and also the potential to boost returns. US investors looking to diversify can easily add other developed market equities. For instance most of Western Europe have excellent firms that are equally good if not better than their American peers. Moreover many of the large cap companies trade on the US markets as well. So it is a wise strategy to not only own US stocks but also add a bunch of developed market equities to a portfolio. From a global energy giant based in the UK to a chemical maker in Germany and and railroads in Canada the universe of investment choices available is huge.

The chart below shows the annual total returns of developed market country returns from 2007 to 2021 based on the MSCI index for each country:

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Note: Returns shown above are based on the respective MSCI Index Total Annual Returns (includes dividend reinvestment) in US Dollar terms.

Source: Novel Investor

Last year Austria was the best performer with a total return of over 42% followed by the Netherlands and Canada. Canada was boosted by the strong recovery in energy prices in 2021. These returns are comparable to the returns of the S&P 500 which had a total return of 28% last year.

Related ETFs:

• iShares MSCI Germany Index Fund (EWG)
• iShares MSCI Canada Index Fund (EWC)
• iShares MSCI Australia Index Fund (EWA)
• iShares MSCI United Kingdom Index (EWU)
• iShares MSCI Singapore Index (EWS)

Disclosure: No positions

The Annual Total Returns of Dow Jones Industrial Average from 1896 to 2021 is shown in the chart below. It proves the known fact that stocks tend to go up in the long-term. During the period shown, the Dow was up nearly three-fourth percentage of the time and only down one-fourth of the time. Here are a few fascinating points from the detailed article by Drew Dickson at Albert Capital:

• Since 1980, the US market has been up for the year 83% of the time.
• From 2003 to 2021, the market has been up all years except just two.
• Since 2009, the market has been down only one year.

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Source: Albert Capital via Novel Investor

He also makes other interesting observations such as comparing US equities to European equities in the above linked piece.

It remains to be seen if the current bull market will continue this year with the market a multitude of headwinds the most important of which is rising rates.

Related ETFs:

• SPDR Dow Jones Industrial Average ETF (DIA)
• SPDR S&P 500 ETF (SPY)

Disclosure: No positions