I believe that everyone has realized the importance of overseas allocation this year, and we have also shown you in the previous article "Starting from Scratch, Learning Xi to Invest in Overseas Markets**", that global allocation has a significant effect on reducing portfolio volatility and improving the risk-return ratio.
But we also found that there are very few overseas configurations to choose from, and there are only one or two overseas markets to track.
Even though the S&P 500 and Nasdaq 100 each have a dozen or so to choose from, they are actually benchmarked against those two broad-based indices.
In fact, there are many good broad-based indices in the United States, such as MSCI U.S. 50, MSCI U.S., Russell 2000, all-market index, etc., which lack tracking in China.
Recently, there is finally a new U.S. stock investment weapon in China, MSCI U.S. 50 ETF, which is an index that is biased towards U.S. stocks.
The MSCI US 50 Index, compiled by the world-renowned MSCI index company, aims to track the performance of the 50 largest free-float adjusted market capitalization** in its parent index, the MSCI US Investable Market Index, and the basic information of the index is shown in the table below.
The base day of the index coincides with the high point of the U.S. dot-com bubble, and if we look at the returns of the last decade: the cumulative return of the index is 19174%, 8 out of 10 years with positive returns, annualized return of 108% with an annualized volatility of 1669% with a maximum drawdown of -3024%。
From 2013-12-5 to 2023-12-5, **wind, note: the above is backtest data).
Stock price = earnings change * valuation change, valuation change is uncertain and will fluctuate around the mean in the long run, and earnings drive is more reliable. And the long-term ** of U.S. stocks is profit-driven.
According to the Orient Securities Derivatives Research Institute's split of the growth of U.S. stocks over the past 70 years**, from 1954 to 2023, the average year-on-year growth rate of the S&P 500 stock price is 9%, of which the average year-on-year earnings growth rate is 8%, and the year-on-year valuation growth rate is only 3%.
The constituent stocks of the index focus on the core assets of U.S. stocks, and the top 10 constituent stocks bring together the "Big 7" (Apple, Microsoft, Amazon, Nvidia, Google, Tesla, Facebook), accounting for 50% of the total weight, which is higher than that of the S&P 500 (about 28% of the top 10).
The chart below shows the top 10 constituents.
These companies include well-known global technology giants, catering to the development trend of artificial intelligence and new energy, as well as stable consumer companies, as well as companies managed by Warren Buffett, oil giants, etc., which have good moats, profitability, and growth.
The chart below shows the sector weights of the index(according to the GICS classification), covering the remaining 10 sectors except real estate;Focus on information technology (380%), communication services (135%), health care (128%), non-consumer goods (122%）
The chart below shows the distribution of market capitalizationMore than 50% of the weight is distributed among the $500 billion over-the-top stocks.
1. Compare with other overseas markets
The chart below draws a comparison of the trends of the world's major MSCI indices in the past 15 years, and it can be seen that the MSCI U.S. 50 Index (black line) is far ahead, India (brown line) is also good, and MSCI China (dollar-denominated, red line) has actually been able to keep up with the previous 10 years, but it has underperformed more in the past 3 years. (2008-12-5 to 2023-12-5, **wind).
2. Compare the MSCI US Index and the S&P 500 Index
Compared with MSCI US (red line in the chart below) and S&P 500 (blue line), MSCI US 50 (black line), which focuses more on core assets of US stocks, has significantly outperformed its performance in the past decade. The chart below shows the trend comparison of the three indices in the past ten years (2013-12-5 to 2023-12-5, **wind).
Analysis of the reason, it may be that these leading companies have strong profitability and have maintained rapid growth in the past 10 years, and the leading companies have actively repurchased their own **, which has promoted **sustainable**.
The table below lists the top 10 companies with the most U.S. stock buybacks over the past decade (data**: Finance Associated Press, as of 2023Q1).
These companies also happen to be constituents of the MSCI US 50 index, with the top 10 constituents in blue, and they have repurchased more than 17 trillion dollars (1217 trillion RMB).
What is this concept?Over the past 10 years, the total retrospective size of all companies in the S&P 500 has been only 66 trillion US dollars, the top 10 repurchases accounted for more than 25%.
At present, the total market capitalization of (2023-12-6) GEM is 1136 trillion. The money used by these 10 companies to buy back in the past ten years is enough to buy all the companies on the GEM.
At present, the total market capitalization of the Shanghai Stock Exchange is 462 trillion, the money repurchased by all companies in the S&P 500 (472 trillion), enough to buy all the companies on the Shanghai Stock Exchange now, and more!
Capital is an important factor driving the best of the best, and the active repurchase of these leading listed companies is a recognition of the company's own value, and it is also an important driving force for them to continue to be the best company.
3. Compare Russell 2000
The MSCI US 50 Index is a typical **-share index, somewhat similar to our SZSE 50 Index.
Comparing the Russell 2000, a representative small-cap index of U.S. stocks, the following chart shows the trend comparison in the past ten years (2013-12-5 to 2023-12-5, **wind).
Although it is said that if you look at it for decades, the small cap of US stocks does have excess returns, but the small cap of US stocks has significantly underperformed in the past ten years
First, U.S. tech giants have shown strong growth and profitability
Second, leading U.S. stock companies continue to strongly repurchase their own **.
At the moment, I don't see a real change in either of these trends.
1. Fill the puzzle of the U.S. stock index
For a long time, only the S&P 500 and Nasdaq 100 have been the QDIIs that track the broad-based US stock market in China, and the Nasdaq 100 is more inclined to technology.
The US 50 ETF is the first ETF in China to track the US stock ** index. It complements the investment tools in overseas markets and is more suitable for investors who are optimistic about U.S. ** stocks.
2. An important asset allocation tool, U.S. stocks have the lowest correlation with A-shares and Hong Kong stocks
It is well known that allocating low-correlation targets in the portfolio can reduce portfolio volatility. Among them, in a large number of configurable overseas marketsU.S. stocks have the lowest correlation with A-shares and the best long-term returnsFor portfolios, volatility can be significantly reduced without reducing potential returns.
In order to better observe the effect, I tested the correlation with QDII** in the overseas market below, so that it can keep all the prices denominated in RMB, which is in line with the real holding experience. (Data**: and slow, the author charted).
It can be seen that whether it is A-shares or Hong Kong stocks, the correlation between U.S. stocks and us is the lowest among all allottable overseas markets, and the effect of reducing volatility is the best.
This is understandable, because China's main relationship with the rest of the world is the Sino-US rivalry. For us ordinary people, betting on both sides is definitely the safest.
3. Fundamental factors
It is difficult to judge the domestic economic situation in the United States, although interest rate hikes are gradually peaking, how long will high interest rates last, to what extent interest rate cuts will be reduced, and whether it will be a hard landing or a soft landingThis year, many institutions have misjudgedWe ordinary investors should not speculate on the macro level.
At the same time, we should also recognize that more than 40% of the S&P 500's revenue comes from overseas markets, which is less correlated with the U.S. economy. In particular, the proportion of leading companies is generally global, and this proportion will be even higher. And revenue diversification will also make the company's earnings more stable.
As mentioned earlier, the repurchase of listed companies is still continuing, and it can still support the stock price. According to Goldman Sachs strategists, including Cormac Conners, American companies have already announced about this year$900 billion in ** buybacksThis would be the third-highest total annual buyback on record. (Data**: Zhitong Finance and Economics, 2023-11-29).
4. Valuation factors
U.S. stocks are now more divergent in valuation!If you look at the S&P 500, it's fine. The chart below shows the PE change of the S&P 500 over the past 10 years, with valuations fluctuating between 18-30, mainly earnings**. It is currently 24 times and is in the 74th percentile.
As of 12-7, data**: wind).
However, the valuation of the Big Seven is relatively high, with the current average PE of 47x, which is much higher than the S&P 500. Since 2023, the stock price of the Big Seven has risen by more than 100% on average, while the cumulative gains and losses of all companies other than the Big Seven have averaged about 1%. (As of 12-7, Data**: Snowball).
That is to say,The Big Seven have contributed the vast majority of the gains so far this year, its valuation is even close to the valuation level of the "beautiful 50" that year, and it is necessary to be vigilant against the risk of valuation.
However, there are also many Wall Street people who believe that the valuation of the Big Seven is justified above the S&P 500. One is that these seven companies generally have strong balance sheets and reliable cash flowsThe second is that they are all significantly in the bear market of 2022;Third, breakthroughs in AI technology have been made in 2023, and it is widely believed that these seven companies will be the biggest beneficiaries of the AI boom.
It is always difficult to judge in the short term, but in the long run, the investment value and asset allocation value of U.S. stocks are undoubted and worth paying attention to. Finally, the ETF that tracks the MSCI US 50 is the US 50 ETF (QDII) (513850).
Tips: **There are risks, investment needs to be cautious!This article is only a personal research and analysis, not as an investment basis, and you are responsible for your own profits and losses. The ** mentioned in this article is for example only and does not constitute investment advice.
Related Reading:
Overseas markets will be the winners and losers of future investments
Is it too late to learn to Xi to invest in overseas markets**?