The market is down less than 4% from a year ago.
It's not being down 4% from a year ago that is driving the question. It's whether decades of conditions that have driven US dominence on the world economic stage are ending. I can't think of a more appropriate reason to consider an AA change.
I agree that the US is working hard to become a has-been economic power. However, where is there to invest that does not have problems?
The EU is deeply indebted, deeply divided, and deadlocked in bureaucracy. Given the surging popularity of semi-Trumpian movements in Germany, France, Hungary, Austria, Poland, Slovakia, etc. and the ever-present risk of more exits from the EU, it is worth asking if their voters are any wiser than US voters circa 2024.
Britain has cheap stocks, but it's for a reason. They've shot themselves in the foot with Brexit and 20-teens austerity, and London continues to bleed financial relevance. Liz Truss kindly revealed that the UK's borrowing capacity is near its limit. Plus the UK faces tariffs from the "trading partner" it was pivoting toward after breaking up with the EU. Eventually they'll be offered the option to become a vassal state of the declining US empire, which is suddenly acting in Russia's favor, or to return, hat in hand, to the EU. They
should return to the EU, but their decision-making record is mixed lately.
Latin America has varying degrees of trade dependency on the US, and as the scapegoat for the current "they're takin' our jobs!" moment it seems they are unlikely to negotiate a good outcome with the Trump administration. A domino effect of recessions are on the way, from Mexico to Chile, and that is concerning since most democracies in the regions are flawed and weak. The worst part is that Latin America has historically been vulnerable to regime change efforts directed by the US, so they are likely to yet again face an era of proxy warfare between the U.S. and the global communist power - this time China.
Africa is in an even worse position than Latin America, with even less reserve strength to resist being the victims of great-powers conflict. Trumpian tariffs and the cut-off of aid will hurt their even-more-fragile democracies and potentially extinguish some of the markets that were even semi-investable before the chaos. South Africa and Nigeria seem to be teetering.
Australia and NZ are screwed in the same way Britain is screwed. They'll be torn between increased trade reliance on China with increased security reliance on the U.S. and will have to pick a path. Like Britain, they'll be offered vassal state status, and it probably won't be worth it. They'll be in the economic line of fire for the likely 2026 or 2027 invasion of Taiwan, and their ridiculously overheated housing market could collapse at any moment. They're just out of good options.
Japan, South Korean, and Southeast Asian stocks are due to tank when the Taiwan invasion occurs. A long-overdue military buildup could follow that event, but it won't be enough to offset demographic decline, or the damage to these mercantailist economies from Trump's tariffs and a global decline in trade. Japan and SK could look very vulnerable if the US military pulls out.
India's future
could be bright, but their stocks are already expensive, and the country's backwardness and one-party-state corruption make it seem unlikely to carry the torch. I.e. if you're fleeing the U.S. stock market for India, and your reason is bad governance and high valuations, that's like going from the frying pan into the fire. Diversification of your bad options is all you'd get.
Then there's China, which returned basically NONE of the gains of extremely rapid GDP growth to foreign investors over the past 20+ years, and is therefore considered uninvestable by many people. Before betting on the communists, consider that US investors will likely be cut off within a year or two if/when China invades Taiwan, just as they were cut off from Russian stock funds, which went to zero. Also consider that China's biggest export market has all but cut them off. Instability is on the way.
A lot of this gets brushed over when one buys a fund like VXUS, but it's worth looking into the trash can before buying it. The current era of US governance weakness only brings the US down to the level of many competing markets.
