Don't Let Your Retirement Account Take The US for Granted

With Thanksgiving happening not one week ago, I had in mind a long list of things for which I am so thankful. Friends, family, job, interests, etc etc-- the list goes on and on. There is an even longer list, however, of things for which I am not nearly thankful enough-- things I take for granted, things that I don't recognize have impacted me positively that I can be happy about. That got me thinking about one thing that I, and ostensibly many other people in the US, take for granted: the historical performance of the US stock market, and the relatively business-friendly environment into which I was born, grew up, and continue to work. 

I know it sounds a little silly but hear me out. I can tell that so many people take the US market for granted. I know this because I frequently hear people talking about how their retirement account or otherwise long-term investments are going to compound at an average of 10%+ annually. They cite a relatively short historical track record of the S&P500, expecting that to continue indefinitely into the future. There are others, a little more conservative and probably slightly more realistic, who expect something like 7% annually. 

These folks would be in for quite a surprise should they learn what citizens of many other developed nations expect out of their domestic markets. I've had a look at a number of retirement accounts, pensions, etc from a number of different countries, and their obvious home-bias of investments has proved to be devastatingly unfortunate.

For example, if I, from the day I was born in 1996 (aka more than half of one's expected working career), invested $1 into the: [[disclaimer, I realize this is a simplistic, cherry-picked analysis that can be easily manipulated to a great magnitude should the time period be altered; I'm just using this to illustrate a point]]

US Stock Market (S&P500): I would have about $5.50. Pretty awesome! With performance like that, it's unsurprising that people expect it to keep going up, and up, and up...

UK Stock Market (UK FTSE 1000): I would have about $1.60. For those of you who did the math, that's not a particularly spectacular return over 20+ years...

Japan Stock Market (Nikkei 225): I would have about $1.30. That's even worse! Can you imagine if my grandparents set aside some money when I was born in a college fund, check that money several years later, and saw it only made 30%?

Switzerland Stock Market (Swiss Market Index): I would have about $1.80. 

Iceland Stock Market (SE ICEX): I would have about $1.00. Talk about a good investment!

Now, not every non-US country has had similarly dismal performance. I believe a couple even outpaced the US. But this begs the question of what will happen in the future. While the market is an intricate and complex machine, with an uncountable number of variables imputed into it oscillations, it doesn't take a genius to determine why some countries' markets outperform others. I do wonder-- or I should say I'm scared about-- whether the US might see long periods of stagnant returns, similar to many of these other countries. Not to steer this in a political direction, but the emergence of a number of anti-free market politicians may be one of many threats to the prosperity enjoyed in America. This is merely something to think about-- those of us who have benefitted from the upward swing in the US market should be extremely grateful; however, will those who toss a couple dollars from their paychecks into some passive ETF and expect their comfortable retirement to be provided to them by a 10% annual return be disappointed? Only time will tell!