Fisher Investments Editorial Staff
US Economy

What About America?

By, 06/24/2016
Ratings993.156566

So far, our post-Brexit commentary has centered on the UK and Europe—the epicenter of Thursday’s vote, and the region with the highest stakes in the eventual outcome. But what about America, the other half of the “Special Relationship?”

The long-term implications for the US are as unknowable today as they are for the UK and Europe. Trade, the primary economic issue, will take time to sort out—both with the UK and the rest of the EU. US-based multinationals with European headquarters in Britain can’t know yet whether they’ll need to up sticks. These are crucial issues, but they are long-term issues. Markets move on probabilities, not possibilities. With so much unknown, it is impossible to discern probabilities today. In time, they will become apparent, but that time isn’t yet here. For now, stay patient, and know nothing changes for US firms doing business in Britain or the EU today. Tellingly, while US stocks fell Friday, they held up far better than markets in the UK and Europe.  There is literally and figuratively an ocean between America and the Brexit saga.

The US and UK share a long history, over a century of strong diplomatic ties, a language and a spirit of self-determination. The Magna Carta is the forefather of America’s Constitution. The Glorious Revolution, which empowered Parliament to check the king’s power, informed America’s own system of checks and balances. The bonds between our countries are undeniable. Yet economically, America and Britain are less intertwined than many perceive. Yes, many businesses operate on both sides of the Atlantic. Many Americans consume British products daily, and vice versa. Yet only 3.7% of US exports last year went to the UK. Only 2.6% of US imports came from Britain.

Todd Bliman
Behavioral Finance

Your Chief Enemy Today Is Likely Yourself

By, 06/24/2016
Ratings874.034483

Maybe you love European politics, and understand Thursday’s Brexit vote inside and out. Maybe you don’t know anything about it and figure the Queen still runs the show. Perhaps you’re really old school and figure Oliver Cromwell is in charge. No matter. This morning you are awaking to scary headlines and sharply swinging markets tied to last night’s UK vote to leave the European Union. (If you want to learn the specifics and what it means and doesn’t mean, click here.) These swings might be triggering strong “SELL” signals in your gut. Maybe it even feels queasy or in knots. Those feelings are natural! But acting on such urges is perilous. Now, during a time of massive volatility, isn’t a time to trade—it’s time for introspection.

Humans are hard wired with the fight-or-flight urge—the uneasy feeling you must “do something” to try to avoid danger. In markets, that urge arises during volatility because of prospect theory (also known as myopic loss aversion). Prospect theory holds that investors feel the pangs of loss more than twice as much as they appreciate an equivalent gain. Then, when fear rises, you get that shot of adrenaline coursing through your bloodstream. Now you think not only that you must do something, but you must do something NOW. This is what’s making you feel uneasy, and driving the urge to take action.

As I wrote to readers five years ago in the hellaciously volatile moments after the US’s credit rating was downgraded amid an acrimonious debt ceiling fight, that urge is not your friend. It is, in my opinion, why legendary investor Benjamin Graham once wrote that, “The investor’s chief problem—even his worst enemy—is likely to be himself.” For long-term investors, controlling emotion and keeping an even keel at times like the present is crucial. With that in mind, here is the strategy I laid out to conquer volatility five years ago, when I gave you my grandfather Dex’s classic-if-redundant advice: “Desperate people do desperate things.” It is apropos today, too:

Fisher Investments Editorial Staff
Developed Markets

Life After Brexit: The UK Economy

By, 06/24/2016
Ratings1523.835526

As the sun comes up, the world is digesting British voters’ decision to leave the EU. The news rocked markets, and many fear more trauma is in store. As we wrote here, it will take years to discover the societal implications, and political uncertainty will likely linger for some time. But that doesn’t mean markets will sink. As we discussed at length here, nothing has changed immediately. Per Article 50 of the Lisbon Treaty, the UK will have two years to negotiate exit terms and a new relationship with the EU. Slow-moving political issues like this typically fade into the background, letting cyclical factors re-emerge as the swing factor for stocks. And here, difficult as it may be to fathom in the heat of the moment, fundamentals support UK stocks. The BoE stands ready to provide liquidity as needed. Once the initial reaction fades, markets should get relief from the vote now being a known quantity. The often colorful campaigning, which dampened investors’ mood in recent weeks, is over. Investors should cease assessing any and all economic data through a Brexit lens. Pundits can stop putting asterisks after all data showing growth, warning that this is prior to the Brexit vote. Investors can now home in on the data, which suggest the UK economy is in fine shape, with consumption and services leading growth.

UK GDP did slow in Q1 2016, from 2.4% annualized to 1.4%.[i] However, slowdowns often come and go during expansions. Exhibit 1 shows annualized GDP growth since 2008, with slowdowns illustrated by the dark blue columns.

Exhibit 1: Growth Rate Fluctuations Aren’t Unusual

Fisher Investments Editorial Staff
Developed Markets

Britain Has Spoken

By, 06/24/2016
Ratings1184.271186

It’s over.

The votes have been counted, and at 4:40 AM GMT, with Leave ahead by 847,815 votes and 308 of 382 areas reporting, the BBC and ITV called it: The UK will leave the EU. With turnout lower than expected in Scotland and London, the rest of England overwhelmingly rejecting the EU and Wales unexpectedly swinging to Leave, the projected tally is Leave 51.9%, Remain 48.1%. Bond, currency and equity market futures markets swung wildly overnight. UK stocks opened sharply lower, and the S&P 500 looks poised to do the same (the FTSE regained a bit of ground as the morning progressed). In overnight trading, Sterling hit 30-year lows before stabilizing as the sun came up. With each constituency that declared for Leave, more questions swirled. Who will replace PM David Cameron, who announced his decision to stand down Friday morning? Will the UK have a snap election this autumn? Will the economy weather the storm? Will the divorce with the EU be a Czechoslovakia-style “velvet divorce” or Paul-and-Heather messy? Will Brexit be followed by Czexit, Frexit or Nexit? How long before Scotland will hold another independence referendum? Will Northern Ireland follow? Can the divided country heal?

Many of these questions will take time to resolve. Once the government invokes Article 50 of the Lisbon Treaty, they’ll technically have two years to negotiate exit terms and a new relationship, though such treaties have acted more like guidelines than strict law in recent years. After initial volatility, we expect markets to move on, once the vote fades from headlines, though volatility and a correction (a sharp, sudden, sentiment-driven drop exceeding -10%) is possible. Yet corrections by their nature are highly unpredictable, and a correction now in global equities is far from certain. At times like this, it’s vital to keep a longer perspective and resist the temptation to react. Events and sentiment can hit markets hard in the short term, but over longer stretches, fundamentals hold the most sway—and the UK being outside the EU shouldn’t hugely change the global economy’s course. Now, we know that may be a surprising statement, particularly since this vote came on the heels of a vitriolic campaign packed with misinformation. Yet today, June 24, the UK is still a member of the European Union, with free trade and free movement with the other 27 member-states—and free trade with all the EU’s free-trading partners. It will remain so, most likely, for at least two years as the negotiation process plays out glacially.

Fisher Investments Editorial Staff
Emerging Markets

India’s Advance

By, 06/23/2016
Ratings294.344828

With most eyes on today’s Brexit referendum and the approaching US presidential election, we figure many investors may have missed the latest news out of India. Two years into Prime Minister Narendra Modi’s administration, and with one of the fastest growing economies in the world, India seems like it’s on an upswing—especially with the latest reform easing foreign investment. However, recent developments at the Reserve Bank of India (RBI) also revealed Indian politicians’ penchant for infighting and prioritizing local interests above all else, often to the country’s detriment. Though investors should be mindful of India’s history of unwelcome political intervention—a common risk with Emerging Markets (EM)—we remain optimistic overall about the country’s current reform progress. 

First, the positive: Modi’s administration just introduced new foreign direct investment (FDI) reforms targeting a swath of sectors like defense, civil-aviation and retail. Foreign investors can now own up to 100% of domestic airlines (up from 49%) as well as 100% of defense companies (pending government approval)—a positive given inefficient state-run companies currently dominate the sector. The government also relaxed a rule requiring foreign retailers to buy 30% of their materials from Indian vendors, rolling out a three-year grace period to comply (and an additional five-year period for retailers offering “state-of-the-art” or “cutting-edge” technology[i]). Requirements on the broadcasting and pharmaceutical sectors, among some others, have been liberalized, too.

Now, we understand these changes aren’t huge, sweeping, sexy moves that get splashed across headlines from Toronto to Timbuktu: The “Big Bang” they are not. But these incremental improvements are realistic, and given India’s history of aiming high and then massively undershooting on reform, Modi’s administration deserves credit for managing expectations and making them happen. Besides FDI reforms, Modi has overseen other positive liberalizations too, from a key bankruptcy law to working on a uniform goods and services tax (GST)—changes that help modernize and streamline parts of India’s archaic, byzantine economic system. All are beneficial for Indian stocks over time.   

Fisher Investments Editorial Staff
Alternative Investments

Why Preferred Stocks Quite Simply Aren’t

By, 06/20/2016
Ratings433.662791

Quick quiz, hotshot! What calls itself a stock, smells like a bond and is often peddled as “safe” high yield? That arcane little security known as the preferred stock, of course! With government bond yields retracing 2012 lows, preferred stocks have become some pundits’ … um … preferred investment choice due to their high “fixed” dividends.  (You will see shortly why we used scare quotes.) We aren’t inherently anti- any security[i], but we think much of the recent commentary on preferreds encourages heat-chasing and glosses over the risks. Fact is, preferred stocks aren’t inherently “safer” than common stock, and their widely heralded dividends come with some big asterisks. Look long and hard before you leap.  

Preferred stocks are one of the quirkier investments out there. They are stocks—slices of ownership in a company—but unlike common stock, they lack voting rights. To make up for this, they’re senior to common stock (hence the “preferred” moniker). Their dividends are paid before common stocks’ dividends and generally less likely to be cut, though preferred dividend cuts and suspensions do happen. If the company goes bankrupt, preferred shareholders also have a greater claim on the assets and might get something out of the liquidation. For this reason, many consider preferred stocks as “safer” than common stocks, but they are no such thing. Preferred shareholders are junior to bondholders, so there is plenty of risk.

As compensation for that risk, many preferred stocks pay high fixed dividends, which sounds great, but “fixed” is relative. Like bonds, many preferred shares have pre-set maturities at issuance. However, if you buy a 20-year preferred stock with a 5% yield at issuance, you might not get that yield for 20 years. Unlike Treasury bonds, many preferred stocks are callable after a certain number of years, letting the issuer repurchase them at par value. If interest rates fall, the issuer has a big incentive to call the expensive preferred stock and replace it with something cheaper (read: lower-yielding).[ii] Bye-bye, happy yield. Hello, reinvestment risk: Where will you be able to replace that yield in the open market without taking undue risk?

Fisher Investments Editorial Staff
The Global View, Reality Check

Getting Sentimental About Negative Rates

By, 06/20/2016
Ratings483.802083

Should you approach negative yields with caution? Photo by Alan Schein/Getty Images

If you were a bank, would you pay borrowers for the privilege of extending them credit? Well, lots of investors are doing just that these days. Global sovereign bond yields are at historic lows, with some—even long maturities—dipping into negative territory. Bond buyers are literally paying some governments to borrow from them. This is in stark contrast to the double-digit interest rate world of the 1970s many retirees and investors remember well, and it’s understandable some see today’s ultra-low yields as an omen of something big, bad and ugly about to happen to stocks.[i] But in our view, yields at generational lows don’t mean the world has fundamentally changed. Actually, the widespread pessimism seems like another brick in the proverbial wall of worry stocks love to climb—a sign the bull market likely has further to run.

Elisabeth Dellinger
Capitalism

Our (Typically) Tumultuous Times

By, 06/17/2016
Ratings1624.080247

History comes in waves. Photo by Elisabeth Dellinger.

Fragments of history are pouring through my head today. They always do when the world looks messy, and what a mess we have now. Dozens slaughtered in a Florida terrorist attack. An assassination in the UK, the first murder of an MP since The Troubles. Borderline fascist far-right parties on the rise throughout Europe. Increasingly vitriolic campaigns on both sides of the Atlantic. One of the 20th century's greatest political achievements at risk of fracturing. War and strife in Syria and Iraq, displacing more and more souls each day. Terrorism in Egypt, France, Belgium, Lebanon and Indonesia. Ceasefire violations in eastern Ukraine. An economic and humanitarian crisis in Venezuela. The drug war continually claiming casualties in Mexico. People losing faith in democratic institutions. Aspiring dictators flouting the rule of law. Human rights abuses. The entire world seems on knife’s edge, in need of a timeout. As markets react, I hear people ask: Has it ever been this bad? This much, all at once? And then, I think of history—from my own life and the books I’ve read. And from the sad truth comes comfort: It has almost never not been this bad, yet life goes on. We wake up, go to work, live, eat, laugh, love. Businesses continue. Economies grow. Markets survive. If recent news has you feeling blue, wondering how markets could ever withstand the storm, perhaps history can lift your spirits, too.

As Solomon wrote, there is nothing new under the sun. History might not repeat perfectly, but as the cliché goes, it rhymes. Freddie Gray, Michael Brown and too many others—and the related protests—are echoes of Rodney King, Eula Mae Love and Watts. Where today we have Orlando, San Bernardino and South Carolina, in the 1990s we had Columbine and 101 California. I’ll never forget February 16, 1988, when as a child I stood in front of the Sunnyvale Public Library, frightened and confused as police cars tore out of the lot across the street, racing to the ESL shooting. In history class we studied the upheaval of 1968—MLK, RFK, the Chicago Seven and so much more. Where boats ferry frightened Middle Eastern refugees across the Mediterranean to southern Europe, during World War II, the boats went the other way, carrying Europeans to safety in Syria and Egypt. And surely I needn’t remind you of Pan Am flight 103, Korean Air flight 007 or TWA flight 847. The settings, characters and motives change, but the basic plot doesn’t.

Fisher Investments Editorial Staff
Media Hype/Myths, Interest Rates

Low Bond Rates Don’t Yield Low Stock Returns

By, 06/17/2016

Are stocks doomed to poor returns for the next decade? Some say yes! Now, maybe this isn’t a shocking development to you, because folks have fretted equity markets’ long-term prospects for years—but it is grabbing headlines anew, with pundits arguing stocks don’t have much room to rise amid historically low sovereign debt yields worldwide. However, the historical evidence refutes the notion stocks can’t enjoy big gains during long stretches of “low” interest rates—a handy reminder for investors today.

Those arguing stocks’ outlook in upcoming years isn’t grand largely hinge their argument today on the bond market. Yields on sovereign debt have fallen to record lows globally, headlined by the German 10-year bund and Swiss 30-year debt now carrying slightly negative yields. Some, rather bombastically, say global yields are at their lowest levels in 500 years (despite the broad historical record not documenting bond yields in 1516 terribly well). Now, a friendly reminder: A bond’s yield isn’t the same as its total return. Total return accounts for both yield and price movement. Because a bond’s price and yield are inversely correlated—when prices fall, yields rise, and vice versa—price movement also impacts a bond’s value.  

With sovereign debt yields historically low, some expect spillover effects on stocks. In particular, some cite the equity risk premium (ERP)—the spread in historical returns between investing in “riskier” (read: more volatile) assets like stocks vs. “safer” (read: less volatile) securities like Treasurys. (We use scare quotes because safe doesn’t actually exist in capital markets.) The ERP, these folks figure, is the premium you get for enduring more volatility. The long-run ERP between the S&P 500 Total Return Index and the US 10-year Government Bond Total Return Index is 4.7 percentage points.[i] So extrapolating the logic here, if sovereign debt yields remain around their current levels, stocks won’t offer much more than middling single digit returns for a long while—considerably lower than long-term averages.  

Michael Hanson
Business in Review

The Universal Man Makes a Way Toward Wealth

By, 06/17/2016
Ratings713.816901

Universal Man: The Lives of John Maynard Keynes – Richard Davenport-Hines

Keynes's Way to Wealth: Timeless Investment Lessons from The Great Economist – John F. Wasik

John Maynard Keynes remains a fascinating person.

First, he’s constantly misapplied and misinterpreted—contrary to most neo-Keynesian thinking today, in my view he’d be staunchly opposed to a lot of today’s central banking measures, particularly massive quantitative easing and negative interest rates. One of the primary criteria for his demand-side policies was that after recessions, in times when the economy was again growing, extraordinary stimulative measures should be taken off the table. Particularly in the US, we’re years past hitting new all-time highs in GDP, yet interest rates still sit near zero. The world over, loose monetary policy continues in record quantity, too. I think he’d be grumpy about that.

Second, though I don’t agree with a good deal of his conclusions (I’ve always been more of a Hayek man), Keynes belongs in the pantheon of great economic philosophers—we see the world differently today because of his views. He effectively invented Macroeconomics, and his influence even a hundred years hence looms over everything. Love him or hate him, he’s an economic titan.

Third, what an interesting life he led! In Universal Man: The Lives of John Maynard Keynes, you get a sense of this. It’s about Keynes’ life outside his economic work, and reveals what I believe is a thread common to many great economists: He was a polymath and a lover of the liberal arts, whose round knowledge of a large number of topics played significantly into his economic insights. He understood Shakespeare about as well as interest rates. That’s far against today’s archetype of the stiff-collared statistician as economist—the hyper-rationalist. Keynes was a tremendous and eloquent rhetorician—a great writer and deft on the political scene. For all his arcane theoretical work, one could argue The Economic Consequences of the Peace, his argument about how to treat Germany after World War I and, at the time a bestseller, was his most influential. All this resulted in an intuitive, insightful, holistic, humanistic kind of knowledge: the intersection of experience and conceptual intelligence. He was among the last of the great tradition of economists as philosophers. In Universal Man, you not only get a portrait of Keynes’ life, you also get a survey of prevailing intellectual life in his time—pre- and post-Depression, and especially in how nations dealt economically with both world wars (in which Keynes played important roles in setting policy).

Elisabeth Dellinger
Trade

30 Years of Trade Deficit Fears

By, 06/15/2016
Ratings734.226027

Let’s have some fun! Here is the back of a book cover:

Here’s another one:

Fisher Investments Editorial Staff
Corporate Earnings

Q1 Earnings: Why Profits’ Dip Doesn’t Mean Stocks Will Drop

By, 06/14/2016
Ratings483.875

Q1 earnings season is nearly over, and with only two companies left to report, S&P 500 earnings will surely notch their fourth consecutive year-over-year drop—the longest streak since the Global Financial Crisis. Public Service Announcement: This is not a reason to be bearish. Actually, at the risk of inviting some allegations our view is Pollyanna-ish, we see several silver linings when we dig into Q1’s results—and some optimistic takeaways for the foreseeable future.

For all their short-term wackiness, in the medium and longer term, markets are pretty efficient. They are also forward-looking. While number crunchers are only now confirming S&P 500 earnings fell -6.7% in Q1[i], markets have long known profits would be ugly—partly because analysts began projecting the decline well before the quarter even began, and partly because stocks lived it. Markets don’t wait for confirmation of economic data, earnings or any other tangentially market-related information. They register it real-time, as investors trade based on their observations, opinions, hopes, fears and every bit of information they hear. Every day in Q1, millions of investors bought and sold based on their general perception of the world around them—and the countries, sectors and firms therein. For the quarter’s first half, that general perception was decidedly negative, as folks feared a host of perceived ills would wreck profits—and indeed, to an extent, they were right. In the second half, however, some of the gloom lifted, and investors started bidding stocks back up. Folks realized the world wasn’t so bad as they feared—and here, too, they were right.

Q1 earnings season is compelling evidence for that last sentence. On March 31, analysts projected a -9.5% y/y S&P 500 Q1 earnings drop, and -4.3% y/y when excluding the much-maligned Energy sector’s projected -105% y/y freefall.[ii] Yet as firms reported, they beat those expectations by a decent margin. A -6.7% drop looks bad in a vacuum, but compared to -9.5%, it’s an improvement. Same goes for the -1.4% drop ex. Energy—better than -4.3%.[iii] Stocks move on the gap between reality and expectations, and while you can’t pin market movement on any one thing, we think it’s telling that stocks rose a bit over earnings season as a whole. If they were hugely bothered by the results, that wouldn’t be the case. Consistently negative surprises would have taken a toll.

Fisher Investments Editorial Staff
Into Perspective

A Story About Assets That Weren’t Toxic

By, 06/10/2016
Ratings1574.299363

Though we are almost a decade removed from 2008, memories from the Financial Crisis still linger in the media’s narrative. From oil crashes to subprime in the auto industry, folks are constantly on guard for a 2008 redux. On the flipside, we see stories heralding the individual brilliance of investors who “turned toxic assets into gold” or succeeded in a market that “everyone left for dead” during that period. In our view, this indicates investors still don’t have a great grasp on what actually drove that 2008 crisis and bear market. Understanding the Financial Crisis’s root causes can help banish those media-conjured ghosts.

One of the frequently cited causes for the 2008 Financial Crisis was the proliferation of “toxic assets,” which broadly refer to mortgage-backed securities (MBS) and other securitized loans (e.g., collateralized debt obligations, or CDOs)—a bunch of loans bundled together, then sliced up into interest-bearing securities. These complex assets, beloved of banks and hedge funds, didn’t trade often, making it difficult to assess their value on the spot. Conventional wisdom argues the credit ratings agencies wrongly deemed them investment-grade, ignoring the often sloppy quality of the underlying loans, and overleveraged banks gobbled them up while ignoring risks they should have seen. When the housing bubble burst, the house of cards collapsed as borrowers defaulted en masse, exposing MBS as toxic filth, taking the entire financial system and economy down with them as banks fell victim to their own creativity and avarice.

However, what if the assets themselves weren’t really toxic, but were infected by a poisonous accounting rule instead? Consider: The beginning of the bear (October 2007) started not long before the implementation of FAS 157—mark-to-market accounting—in November. The bear didn’t end until March 2009, right around the time Fed chair Ben Bernanke spoke of revising the rule and a congressional hearing on the subject demanded the Financial Accounting Standards Board (FASB) take action (they suspended the rule on April 2). The evidence suggests this isn’t simply a matter of conflating coincidence with causation, either.

Michael Hanson
Media Hype/Myths

Book Review: Deconstructing Financial Pundits

By, 06/09/2016
Ratings854.435294

Clash of the Financial Pundits: How the Media Influences Your Investment Decisions for Better or Worse – Joshua M. Brown and Jeff Macke

Postmodern philosophy is a mishmash of confusing stuff—full of brooding people in cafes, trying to deconstruct knowledge and our modes of expressing it (like language). But a great investing lesson came out of it: Look at the medium, not just the message. When it comes to the financial press, all investors should be thoughtful deconstructionists. (But maybe ditch the part about hopeless brooding.)

Joshua Brown and Jeff Macke’s Clash of the Financial Pundits is a worthy tour of that medium, and will open your eyes to the business—yes, business—of financial punditry.

As we’ve said at MarketMinder forever: Think like an economist and ask yourself where the incentives lie. Well, what are the motives of financial media? To help you? To keep you über informed to better achieve your investing goals? Ha! No. It’s to sell advertising. So take all the principles of marketing and advertising as your guide, and you can start to see punditry more clearly.

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Recent Commentary

Fisher Investments Editorial Staff
US Economy

What About America?

By, 06/24/2016
Ratings993.156566

Brexit's ramifications will likely ripple across the Atlantic, but it's too soon to know how.

read more
Todd Bliman
Behavioral Finance

Your Chief Enemy Today Is Likely Yourself

By, 06/24/2016
Ratings874.034483

Volatile swings like those that followed Thursday night’s Brexit vote aren’t a call to action. They are a call for reason.

read more
Fisher Investments Editorial Staff
Developed Markets

Life After Brexit: The UK Economy

By, 06/24/2016
Ratings1523.835526

While Brexit talks might hang over sentiment, the UK's economic fundamentals remain strong.

read more
Fisher Investments Editorial Staff
Developed Markets

Britain Has Spoken

By, 06/24/2016
Ratings1184.271186

The vote for "Brexit" rocked markets, but markets should ultimately prove resilient.

read more
Fisher Investments Editorial Staff
Emerging Markets

India’s Advance

By, 06/23/2016
Ratings294.344828

Despite some political squabbles, India is making solid reform progress.

read more

Global Market Update

Market Wrap-Up, Thursday, June 23, 2016

Below is a market summary as of market close Thursday, June 23, 2016:

  • Global Equities: MSCI World (+1.4%)
  • US Equities: S&P 500 (+1.3%)
  • UK Equities: MSCI UK (+2.1%)
  • Best Country: Italy (+4.4%)
  • Worst Country: Singapore (+0.2%)
  • Best Sector: Energy (+2.0%)
  • Worst Sector: Utilities (+0.6%)

Bond Yields: 10-year US Treasury yields rose 0.05 percentage point to 1.74%.

 

Editors' Note: Tracking Stock and Bond Indexes

 

Source: Factset. Unless otherwise specified, all country returns are based on the MSCI index in US dollars for the country or region and include net dividends. Sector returns are the MSCI World constituent sectors in USD including net dividends.