The Truth Will (well, should) Set Trade Free!

In talking with some old friends (clients of roughly 20 years) yesterday about how technology, about how our ability to capture and assimilate data, and, thus, about how our systems, processes and approach to the markets have evolved over the years, I stressed how important it is that I be able and willing to transcend my moods, my fears, my whims, and, most importantly, my personal biases as I assess the facts and make investment decisions on behalf of our clients.

I thought about that conversation while getting a head start today on my weekly analyses. I got to thinking about the present narrative around the U.S. and its commercial relationship to the rest of the world -- as I updated our chart that compares the performance of the MSCI U.S.A. [Equity] Index to the MSCI World Ex-U.S. Index -- and how there's what I find to be a curious willingness, if not eagerness, among some folks (not the folks from yesterday, by the way) to buy into what they're hearing.

Said narrative, from the top, suggests that the U.S. has been sorely abused for years by its trading partners. 

Now, being a proud American, and not to mention being brought up in an uber-competitive family -- the youngest of four athletically endowed (the oldest 3 at least) boys, and the son of a fiercely competitive, and very successful, high school football coach -- my life has been an immersion in team spirit; in an us versus them mentality. And, yes, as you might imagine -- while lacking the religious fervor I witnessed in other families -- the household of my youth was more or less permeated by political conservatism.

That last sentence said, I must add that while I hold both my parents in the highest esteem -- as they both exemplified honesty and integrity -- my dear departed mother was the stickliest of sticklers when it came to telling the truth; the absolute truth! I'll never forget when brother Bradley's buttocks caught the blame for breaking the big wooden spoon Mom used to stir the cake batter on Sunday afternoons (dessert was only a weekend affair at the Mazorra abode); an event that occurred simultaneous with him having been caught bending the truth! Being very young and impressionable at the time I ...well... I'll just say that the "event" melded a profound and permanent impression into my spongy little psyche. Therefore, a career in -- let alone a blind obsession with -- politics was never going to happen, if you catch my drift.

So, being competitive by nature, and having generally sympathized with the political bent of my parents (Dad especially), I might certainly find myself yielding to the notion that the U.S. has been somehow disadvantaged all these years as commerce has grown exponentially global. Problem is, the truth simply doesn't support the narrative -- which brings me to our chart.

Here's a 30-year look at the MSCI US/MSCI World Ex-US ratio. When the line is rising U.S. equities are outperforming the rest of the world's equities, vice versa when its falling:



Now we can talk all day about life in America versus elsewhere -- a topic by itself that entirely dispels the presently popular, and erroneous, notion that the U.S. has been somehow compromised by global trade -- or we can simply consider how, frankly, ludicrous it is to suggest that the U.S. has been the loser in some international trade contest when the value of its companies has, over the long run, so outgrown the foreign competition. 

In truth, in the aggregate -- regardless of stock market performance -- there simply are no losers when it comes to global trade. In fact, the more the world's nations transact across borders -- that is, the more they leverage each other's comparative advantages -- the richer they all become. Any suggestion otherwise is purely, and dangerously, political.

Oh, and by the way, in case the topic of the hour has you curious, here's a chart comparing the growth in U.S., Mexican and Canadian equities since NAFTA was put in place 24+ years ago:



Again, reality just doesn't allow for the notion that the U.S. has been at all abused by its trade agreements with other nations. Including, if not especially, the one currently on the political chopping block!