Charts That Count: Post-Lehman US stocks still outperform the world

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This has been America's decade. Now, as anybody who's been reading the FT recently will be aware, it's almost exactly 10 years since we suffered the worst of the financial crisis, when Lehman went down. What has been very surprising, is that even though that crisis seems to be based here in the US, it's the US stock market that has done far better than the rest of the world.

Now, this blue line here shows you the S&P 500 main index of the US stock market, divided by the MSCI, rest of the world's index-- all world, excluding the US. And you can see that when we set it at 100, right when Lehman went down 10 years ago, it is now, just this last week, finally reached 200. In other words, the US has outperformed the whole of the rest of the world's stock markets by double over the last decade, which really is quite something.

Now how did it do that? A big part of this plainly is QE, as we all know by now. The US Federal Reserve was much more enthusiastic about buying assets, which meant that it was propping up American share prices, while other central banks weren't. That certainly helps explain that great rise during that era of QE there. And it also helps explain the rise we've seen in the last few months, because it also left QE earlier than other banks, leading to higher interest rates, leading to money being attracted to the US, strengthening the dollar, strengthening stocks.

Now there's a second reason many people quote, which is, what you might call, big tech. Obviously, the companies that are doing best these days are technology companies. Silicon Valley is in the States. The most successful technology companies tend to be American. There is a limit, though, to how much you should take this to heart, because this red line you see here is the S&P 500, excluding tech, relative to the rest of the world. And as you can see, even if you exclude tech, the rest of the American market has pretty much beaten the rest of the world by some 80% over the last decade. If it was truly a case that all of the game was done to technology, you'd have expected that line to be more or less horizontal. It plainly isn't.

Now that leads to the final, and perhaps most alarming, reason why the US is doing so much better, which is the classic battle between greed and fear. What we have now, rather than a choice between greed and fear, is greed, excitement, here in the US, and fear everywhere else. There have been far more problems for the rest of the world over this period. Whether it's the Eurozone crisis here, or the China devaluation here, or any number of emerging market crises in this last few months.

Now the problem is that it's very difficult for greed and fear to co-exist. If you see further leaking of money out of the emerging world into the US, that will tend to make the conditions for the emerging world all the harder, and push them towards a crisis. That will leave the US without markets to sell its goods. That will hurt the US ultimately. So it is hard to see how we can have another American decade, unless greed and fear find their way back into alignment once more. It's very hard to see how this can be sustained for another decade.