March 2015 Portfolio Notes

PDF imageView the full March 2015 Portfolio Notes here.

mar15.countriesFebruary Comments

  • The MSCI ACWI was up 5.57% in February, moving the global markets back into the green for the year. Russia led the way up 22.82% while Turkey was down 9.11%
  • Europe has been the best performing region on the year up 10.22% in LCL. Dollar strength has been a headwind, as Europe is only up 6.27% in USD.
  • Emerging Markets are positive, but trailing developed markets for the year. They have trailed developed markets by 38.24% over the last three years.

March Rankings

  • Japan and Israel surged up the rankings. Japan showed solid improvements in their risk ranking, while Israel improved in both fundamentals and risk.
  • The March country rankings show a decisive bias towards developed markets. China, Indonesia, and Taiwan are the lone emerging countries in the top 10.

Country Selection 101 – Exploring the range of country returns

In Dave Garff’s 2011 whitepaper, Do Countries Matter?, one of the most compelling charts was looking at the Monthly High-Low Range of country returns. The chart looked at 39 countries in both emerging and developed markets going back to 1991, and charted the monthly range of returns between the best performing market and worst performing market. Since 1991 it has been a compelling opportunity for investors to consider that by purely focusing on country selection within their global equity allocation, the long-term average monthly return range was over 33% per month.


However, since 2010 global investing has been marked by a period of significant outperformance of the United States relative to the rest of the world. As of July 31, 2014, the United States had outperformed the average country in the 39 country universe by a cumulative 56.02% in USD or an average annualized performance of 10.49% per year.

countryselection2What is striking to me is looking at how significantly the range of returns dropped from the last decade. During the preceding 10 years, the United States underperformed the average country by a cumulative 299.95% or average annualized performance of 14.22%. Since that time, the average monthly range dropped by nearly 6% per month and the max monthly range dropped by nearly 30%.

countryselection3While it is possible to look at the recent trend and suggest the country selection opportunities are narrowing, I would suggest that the recent drop in country selection opportunities has more to do with United States dominance of global equity markets, and less to do with a systematic change to the marketplace. As international markets turn and more specifically emerging markets recover, my expectation is that country selection opportunities will increase and give investors increased alpha generating opportunities for their investment portfolios. Using the abundant list of single-country ETFs should make expressing those opportunities even easier.


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Disclosures: This article was written by David Allen, a Portfolio Manager at Accuvest Global Advisors. This article is strictly informational and should be used for research use only. It should not be construed as advertising material. The opinions expressed are not intended to provide investing or other advice or guidance with respect to the matters addressed in this brochure. All relevant facts, including individual circumstances, need to be considered by the reader to arrive at investment conclusions to comply with matters addressed in this brochure. Charts and information are sourced from Accuvest, unless otherwise noted. Remember that investing involves risks, as the value of your investment will fluctuate over time and you may gain or lose money. You should seek advice from your financial adviser before making investment decisions. Investment risks are borne solely by the investor and not by AGA. AGA is an independent investment advisor registered with the SEC. All disclosures, marketing brochures, and supplemental firm sheets are available upon request.