Financial Industry Insights from Advisors Asset Management


The Biggest Story Investors Are Ignoring

U.S./International Leadership Changes After Inversions

Relative Performance and Yield Curve Inversions 1971-Present

Relative Performance and Yield Curve Inversions 1971-Present  

Source: Bloomberg, MSCI, S&P and Todd Asset Management as of 2-28-21
Series is indexed to 1 on 12/31/1971. The S&P 500 is used to represent U.S. equities. To show a longer time frame, the MSCI ACWI ex-U.S. was chained with the MSCI EAFE to represent the International Equities. The ACWI ex-U.S. is used from inception at 12/31/87, and EAFE prior to that.

  • Yield curve inversions (when 10-year U.S. bonds yield less than 3-month Treasuries) have been great predictors of cycle changes between U.S. and International market leadership. The 2019 inversion indicates it may be time for international markets to start leading again and we expect to see new leadership for a new cycle.

  • Since 1971, there have been seven periods of inversion. Those inversion periods are shaded in the chart above. The line illustrates the ratio of the S&P 500/ACWI ex-U.S. (or EAFE prior to 1987). An upward bias means the U.S. outperformed, while downward shows international outperformance. Performance flip-flopped and leadership changed after each inversion. Since 1980, the average cycle length was almost 10 years.

  • Following the 2019 inversion, international markets have outperformed the S&P 500 since May of 2020, something you rarely hear about. In our opinion, this is the biggest story being ignored by the market, and we believe may be the beginning of a long period of international outperformance.

CRN: 2021-0303-8993 R

The opinions and views of this commentary are that of Todd Asset Management and are not necessarily that of Advisors Asset Management.

This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit

The indexes used in the chart are unmanaged, and not available for direct investment. They do not include the reinvestment of dividends, nor do they reflect management fees or transaction costs. The S&P 500 is a widely recognized index of market activity based on the performance of common stocks within the S&P 500 Index. The MSCI ACWI ex-US is a widely recognized index of market activity based on the performance of common stocks within the MSCI ACWI ex-US Index. The MSCI EAFE is a widely recognized index of market activity based on the performance of common stocks within the MSCI EAFE Index.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2021.



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