Three years ago this month we wrote our first Par 3 email. The very first article reported that the US had been beaten badly in the Ryder Cup by the European team that year…a trend that by that time had extended a decade since as the US had lost four of the five previous cups. (Note, the Ryder cup is played every other year.) Feeling clever, we compared this trend to stock markets. By 2018 a trend was firmly in place of US stock market outperformance versus developed international stock markets like Europe and Japan. The article stated, “We are quick to point out that this trend isn’t sustainable. Historically, this is a cyclical relationship that lasts many years and we do expect it to reverse. Eventually.” Well…guess what? It hasn’t. Eventually is still an unknown date in the future. US stocks have trounced non-US stocks over the past three years.
Trends can often last longer than anyone expects. Many market participants are quick to predict when very large trends will turn. We think it’s important to recognize that this is VERY difficult. Betting big on one of these reversals can be very costly. Big trends don’t reverse just because they have been in place a long time; typically, there is some catalyst to trigger the turn. Speculating on the US Ryder Cup team, on the other hand, might be more enjoyable and less costly. They won a decisive victory over the Europeans a few weeks ago in the most recent Ryder Cup. Perhaps that trend is turning.