OUCH! 2018 is certainly not the year to be global in one’s asset allocation, but I certainly have been, and I suspect that many DB plans and DC participants are, too. As the chart above reflects (as of Friday, October 19th), the U.S. is one of only four equity markets to have declined by less than 10% from their all-time high close. Unfortunately, market action since Friday will have the U.S. equity market getting closer to that -10% mark.
Is the U.S. performance justified at this time? Are we an island in the sea of weak country performance or are we kidding ourselves that the U.S. can continue to produce strong corporate earnings, jobs, economic growth, and increased demand for goods and services despite what might be happening outside our boarders? I don’t believe that the U.S. is on the cusp of a recession at this time, which is what we normally need in order to see a significant pull-back in equity prices. However, given the disparate results among the various equity markets, it might just be time to lighten up on the U.S. equity exposure and reallocate some to both developed and emerging markets overseas. What do you think?