Of those two, valuation expansion is probably most directly tied to interest rates.
Going back to the original point (I did not make it): higher expectations are already reflected in US stocks' higher multiples today. For US to continue to outperform ex-US, the multiple either needs to increase even further for US equities relative to ex-US (reflecting increased future expectations about subsequent future performance) OR they need to outperform - not just outperform ex-US stocks, outperform by a margin that is more than already expected today.
In physics/math terms, we are talking about the derivative, not the rate.
Given today's starting conditions, I find it hard to envision a repeat of the 2010 onwards combination of beat up stock prices and ZIRP driving valuation expansion like it did in the recent past.
Thus, I find the US vs ex-US question a bit moot when faced with the elephant in the room:
Will stocks (in any domiciled country) repeat the multi-year performance of 2010-present?
I think it's highly unlikely based on current conditions, and my planning expectations are assuming pretty low stock returns.
Statistics: Posted by watchnerd — Mon Sep 02, 2024 8:41 pm — Replies 6791 — Views 1663276