Salient to Investors:

Elroy Dimson, Paul Marsh and Mike Staunton, authors of “Triumph Of The Optimists: 101 Years Of Global Investment Returns” (2002) wrote:

During the last century, the US achieved market dominance, the exchanges were consolidated, and secular sector rotation occurred.

Most of the available historical stock market data for the years prior to 1970 was only for the US market.

The US stock market was the big winner of the 20th century, increasing its weighting to 47% of the world’s total, while generally outperforming the rest of the world’s markets due to larger investments in physical and human capital, greater technological advancement, and greater productivity growth.

The UK took much longer to recover from the world wars, slowed by a diminished role after the collapse of the British Empire and the complicated bureaucracies of the colonial system. Problems with defense spending, labor, productivity and investment plagued the British economy and markets until the mid 1970s.

The US suffered relatively little disruption to its stock market during the world wars and did not have the prolonged declines that many European and Asian markets experienced. The US economy largely benefited from the wars, with GM and IBM thriving. (Phillipe Jorion and William N. Goetzmann said the Japanese stock market saw a 95% decline in real returns between 1944 and 1949.)

The economic and stock market performance in the US has not been typical of other countries and, therefore, should not necessarily be extrapolated into the future.

The stock markets of 1900 had more regional exchanges than those of today – the US and UK each had 20 to 30 different regional exchanges.

Short-term sector rotation pales in comparison to the changes that can take place over the long-term. The economies of 1900 and 2000 had few similarities – 84% of the sectors represented by market cap today were of immaterial size or non-existent in 1900.

Paul Bairoch and Richard Kozul-Wright said that between 1930 and 1990, the cost of a 3-minute telephone call from New York to London dropped from $245 to $3.

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