Must-know: American stocks have outshone the rest so far in 2014

Russ Koesterich, CFA - Author

Aug. 18 2020, Updated 6:22 a.m. ET

Waiting for a market correction? Wondering how to potentially protect your gains? Forget merely opting for traditional defensive sectors. Instead, consider Russ’ four suggestions.

Year-to-date investors have had few reasons to play defense. Stocks, at least in the United States, have rallied and credit continues to hold its own.

That said there are market risks not too far down the road. There’s the potential for disappointing US third-quarter growth and worsening Middle-East turmoil.

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Market Realist – The graph above compares the year-to-date price performance of the S&P 500 (SPY) with the iShares MSCI ACWI ex-U.S. index. American stocks (IVV) have outperformed the rest of the world’s (QWLD) (ACWI) by a wide margin. The S&P 500 has delivered returns of 4.7%, despite the recent correction. Meanwhile, the iShares MSCI ACWI ex-U.S. index has eroded investor wealth with negative returns of -5.4% for the year to date.

Although better economic data over the next few months could support stocks, negative cues from Europe (EZU), the Middle East, or China (FXI) could send stocks tumbling. In that case, the traditional portfolio would need a rejig.

Please read on to understand what strategies you might adopt to protect yourself from such a downturn.


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