Is the global economy on the verge of another collapse? Thirty years ago, if you were a stock market investor in the United States, your main concern would probably have been the overall health of the U.S. economy. There was simply no reason for most investors to pay attention to the economic wellbeing of other countries. After all, prior to the 1990s, almost 75% of all U.S. corporate earnings were derived from the domestic economy.
Of course, things are much different these days in terms of how the global economy affects your investments. The investment panorama began to change rather swiftly, beginning in the early 1990s thanks to the introduction of NAFTA, free trade, and globalization. Since global borders opened to imports and exports, your investment portfolio has taken on a more global flavor, whether you realize it or not. Today, U.S. corporations derive 47% of their earnings from overseas activity. In the not-to-distant future, 50% or more of all U.S. corporate earnings will flow from overseas.
How well is the global economy faring?
Today, the global economy is in much better shape than it was just a few years ago, at the time of the 2008 world financial crisis. In fact, many countries have enjoyed one of the longest periods of continuous economic growth in decades. Currently, all major economies are growing steadily and moving in the right direction.
As we look deeper into the 21st century, we certainly need to focus more of our attention, and possibly our investment money, on opportunities around the world. In other words, as investors, we should take a more “big picture” view of our investment portfolio.
To learn more about the global economy and how it could possibly affect your investment portfolio, click here.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published March 19, 2018.