File this under “Things I’m Thankful For, But Have No Control Over”.
The S&P 500 is off to a blazing start in 2024. Q1 is ending, and the index is already up double-digits (10.1%).
It’s the U.S. equity market’s best start since 2019!
I know, a quarter isn’t much to be excited for, but the U.S. market has really been rocking for a full decade now. Look how much the S&P 500 has grown …
The U.S. market has tripled in value. That’s a whopping +10.96% annual growth rate – not even counting the huge value of reinvested dividends. What a great span of time to have retired early, huh?
If you want to know how lucky you’ve been, looked at the EAFE index over the same 10 years. Europe, Australiasia, and Far East have been choppy, at best.
If you were early-retired in any of these geographies, you’d be hurting, financially. The compounded annual growth rate for this index is just 1.79%.
That’s just 1/6th of the return that the US-based S&P 500 delivered. EAFE stocks have a higher dividend rate (+80bps: 2.3% v. 1.5%) on average, but it’s not material in filling that gap.
What reasons do you think explain the phenomenal U.S. performance compared with International stocks?
Images: Pixabay; Apple Stocks Charts
MrFireStation 
I retired in 2020, and attributed the stock market’s performance during Donald Trump’s Presidency as putting me over the threshold for a comfortable retirement.
Here is a simple chart that shows what was going on over the past 10 years. As a proxy for the S&P 500’s performance with dividends reinvested, I looked up the returns for Vanguard’s S&P 500 VFINX mutual fund. The actual performance would be slightly higher because this open mutual fund has a .14% management fee.
Year Return President / Annualized Return
2014 13.51% Obumbler was President
2015 1.25%
2016 11.81% 3Y Annualized Return 8.72%
2017 21.67% Trump becomes President
2018 -4.52%
2019 31.33%
2020 18.25% 4Y Annualized Return15.90%
2021 28.53% BiDUMB becomes President
2022 -18.24% 2Y Annualized Return 2.51%
2023 26.11% Market is predicting a Trump Presidency!
One of Trump’s policies in particular was very good for the US stock market. The US had the second highest Corporate Tax Rate in the world before Trump cut it. We were second only to that economic power house of country, Chad. (Chad is actually putting it in Trump language, an s-hole.) Having the second highest Corporate Tax Rate in the world caused economic distortions such as US companies moving their tax domiciles offshore to places like the Netherland’s Antilles and Ireland.
Countries in Europe that you normally think of as being Socialist actually have very low Corporate Tax Rates. They do this, because it allows their companies to buy US companies and strip away their Corporate Tax Base. An example of this is that all American company Anheuser Busch is now owned by a Belgium Company Ambev. Ambev saddled Anheuser Busch with a ton of debt. Ambev extracts the profits out of the US as debt payments which are not taxable in the US and recognizes the income in Belgium at a lower Corporate Tax Rate
Looking back at FJB’s first year honeymoon, the miseducated elites thought that BiDUMB’s policy were going to do well. During his second year, the reality that BiDUMBnomics is bad sunk in. The market is now predicting that BiDUMB is going to be a one term President.
I watched a presentation by Scott Bessent at CPAC. He was Soros’ Investing Chief during quite a bit of Soros outperformance including breaking the UK Pound. He predicted that Trump’s first term would lead to stock market outperformance. His view diverged from the investing establishment. He attributes the current market outperformance to anticipation that Trump will become President again in 2025. I was not able to find a replay link on CPAC, but am posting an article that gives one the gist of what he had to say.
https://www.fa-mag.com/news/ex-soros-investing-chief-bessent-bets-on–trump-rally–ahead-of-election-76797.html
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Interesting comments, Klaus! You are like a Doberman … with a strong political bite! 😉
I’m not as confident that Trump’s potential return is what is driving the markets. They performed well when he was in office, but they’ve also succeeded under Biden. While Biden gets blamed for inflation, Trump’s signature was on even more debt.
I agree that the corporate tax cuts were a good thing – and I’d like them to continue – we weren’t as far out of whack internationally as it seemed. I believe that pre-2017, the effective tax corporate rate – the rate after deductions & credits – in the US was pretty close to the OECD average.
Economically, I prefer the Right to the Left, but for me, it’s not as simple as seeing one side as smart and the other as dumb. They have both been dumb with our finances. Not just Biden & Trump, but every President as far back as I’ve been voting (1984, David Bergland-Libertarian).
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I also would like to see a balanced budget that is made by cutting spending and not raising taxes beyond what is already my household’s highest expense. However, look at the way the Freedom Caucus Members of Congress are treated as extremists by others in Congress and the legacy media. The same happened with The Tea Party Republicans who got also got special treatment from Lois Lerner’s and the Cincinnati IRS Office. Hard to imagine that living within a country’s means is considered radical instead of the right thing to do.
It is time to hugely restructure government do do away with entire Departments that have come to believe that they exist only for themselves and the American People. Hopefully we get a President who has been mistreated by the Departments and is highly incentivized to say “You’re Fired to whole agencies”.
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I completely agree, but I have seen no significant interest from the electorate in my state. Every incumbent, including the governor, AG, and mayors of StP & Mpls, were re-elected in 2022. Despite 2 years of record fraud, lockdowns, and riots. They promptly raised state spending +40% and blew a $18B surplus. Approval ratings are as high as ever 2 years later.
I guess it has to get as bad as it has been in South America for a Javier to come to the forefront!
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Let’s hope not. Argentina took a hundred years of Socialist hell before they woke up. They were the fifth wealthiest country in the world before Peronism took place.
Legacy media shields its viewers from the fact that George Floyd was high on a likely fatal dose of fentanyl, also had Covid and coronary artery disease at the time of his death. He was the opposite of a hero and your governor sat on his hands while your downtowns were destroyed. The governor of Wisconsin allowed Kenosha to be torn apart as well.
Blame this on the modern US public education which was infiltrated by a Communist education reformer named Thomas Dewey in the 1920s. He patterned the US public education system to be like the Soviet Union and purposely dumbed down US public education. To get a feel for how much US education has been dumbed down, I suggest you check out a late 1800s grammar test from a grammar school exist exam and a McGuffey’s reader. This will help you understand how Samuel Clemens, better known as Mark Twain, was able to write the books he wrote despite only graduating from an 8th grade Grammar School.
Dewey’s goal was to turn out students who were accepting of a small group of elites making all their decisions for them and not to trust their own common sense and what they see with the own eyes.
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I wish we could go back and really understand what happened with George Floyd. Impossible to understand when it happened due to the media & political hysteria.
Is he the same Dewey who later lost to Truman? NY Governor.
I would vote for a Constitutional Amendment titled “Separation of Education & State”. We sent our son to parochial schools and he went to a private college. They are better than the public schools, but have the same ‘progressive contagion’.
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I actually made a typo. The correct Dewey was John Dewey. You are right, Tom Dewey was the NY Governor who lost to Truman.
My sons went to Catholic School K-12 as well. The K-8 elementary school they went to achieved an average Grade 12 reading score from its kids graduating the 8th grade, while the public schools cannot achieve grade level. The principal of the elementary was a Conservative and she did a great job having attrition of the Liberal teachers and replacing them with Conservatives who were not cafeteria Catholics.
Ironically, many of the teachers were not traditional credentialed teachers. Many of them were retired from other fields and went into teaching as a second and passionate career. The math teacher was a retired garment manufacturer, who also started a very strong theater program with the goal of getting students comfortable speaking in front of large audiences. The music teacher was retired from scoring films for the studios and did a great job broadening my son’s taste in music.
The hard part with separation of Government and Education is that the Teacher’s Unions are the largest source of campaign funds for the Demonrats. After the Demonrats get into office they pay back the unions by fighting against school choice. School choice is a winner with parents from all groups because they want their children to do well.
I have to leave one more Doberman bite mark on the teacher’s unions. The Milken Foundation found that one of the biggest problems with US Education is that the field if over represented by those who score in the lowest 10% of SAT scores. This, plus not using dumbed down curriculum is why home school parents and non-credentialed parochial school teachers do a better job than the teacher’s union professionals.
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