The two biggest opportunities Michael Cannivet, founder and president of Silverlight Asset Management, sees for U.S. investors over the next 5 years are: (i) protecting capital ahead of the next bear market, and (ii) subsequently overweighting international assets.
For most people, money management is a long-term compounding game. Viewed through that prism, it's not how much you make during a bull market that counts, but how much you keep and roll into the next cycle. The average bear market wipes out over half of a prior bull market's gains. That makes preserving capital paramount in a late-cycle environment.
Cannivet recently caught up with Matthew Lui, Canterbury's Global Equity Research Committee chair. Lui said, "Investors who ignore international stocks due to 'home country bias' are missing out on growth opportunities in other parts of the world."
Case in point: After adjusting for purchasing power parity, China became the world's largest economy in 2014. China is growing GDP four times faster than the U.S. Nonetheless, the U.S. has significantly outperformed this cycle. This year is a continuation of that trend. The S&P 500 is up about 10%, while foreign markets like the German DAX (-7%) and China's Shanghai Index (-22%) have faltered.
But if you're a long-term investor, Mr. Lui would recommend maintaining at least some foreign diversification. "Including both U.S. and non-U.S. stocks can result in a smoother overall performance pattern," he says.