1989-2008 Annual Returns for Select Developed Markets

The chart below illustrates annual returns between 1989 and 2008 for select developed foreign markets. The chart shows the returns for the various MS country indices for Australia, Canada, France, Germany, Hong Kong, Japan, Switzerland, and the United Kingdom. As references, the chart also includes annual returns (in terms of U.S. Dollars) for the MSCI EAFE Index of foreign developed markets and for the U.S., as represented by the S&P 500 Index.

Many investors invest at least part of their stock market portfolio in foreign stocks, such as emerging markets and/or foreign developed markets. The most widely followed index of foreign developed markets is the MSCI EAFE Index. As I have previously mentioned, the U.S. Dollar will likely continue to weaken over time versus foreign currencies as a result of ongoing budget and trade deficits.

As shown in the chart below, the MSCI EAFE Index provided a meager cumulative return of about 85.70% between 1989 and 2008, an annualized return of just about 3.14%. The returns of the MSCI EAFE Index were dragged down by the abysmal performance of the Japanese stocks. The MS Japan country index had a cumulative return of -39.51%, or an annualized return of -2.48% during the period tracked.

However, strong performances were realized by some of the foreign developed markets. As shown, the MS Switzerland Index realized an impressive cumulative return of about 648%, or about 10.52% per year. Hong Kong was another strong performer, returning about 569%, or 9.98% per year.

Some of the weaker performances were realized by the United Kingdom and Australia. The MS United Kingdom country Index returned a total of about 268%, or 6.74% per year. The MS Australia country Index, on the other hand, returned a total of about 274%, or 6.83% per year.

U.S. stocks performed well in comparison to the foreign developed markets tracked, beating all of the foreign markets tracked except for Switzerland and Hong Kong. The S&P 500 Index returned a total of about 404%, or about 8.42% per year during the period tracked.