Forks in the Road 2014 & 2019

I was investigating whether other market segments were keeping up with the S&P 500, which seems to be ignoring the plight of ordinary people and charging ahead in spite of COVID-19. To my surprise, the biggest forks were in mid-2014 and early-2019.

In 2020, there was a sharp divergence with the S&P 500 getting ahead in April by about 8%, but after that the various segments mostly came along together:

Comparison of large and small and micro caps and US vs. world markets, 2020, from Yahoo Finance

But the forks in 2014 and 2019 both have lasted up through the present:

Same comparison from 2015

In 2014, mid-year, it is easy to identify suspect events that led to a continuing 9.5% per year differential, with emerging markets and world-other-than-US essentially flat while the US grew rapidly:

  1. Russian invasion of Ukraine and subsequent sanctions on Russia
  2. Emergence of ISIS and counter attacks
  3. Unrest in Yemen
  4. Fracking boom and downturn in oil prices

These problems led to mass migrations, affecting Europe. So Russia, North Africa, and the Middle East have all been in turmoil since. The crash in oil prices caused economic decline in parts of the Middle East that avoided war, and in Venezuela, while the US benefitted from fracking and becoming an energy exporter.

If you have other ideas for the fork in 2014, please leave a comment below.

The causes of the 2019 fork inside the US, which happened early in the year, January or February, are harder to identify. Democrats took over the House of Representatives, causing some stalemate in government. This gradually led to focusing on the border wall and impeachment instead of governance. But did this really affect the fortunes of smaller companies more than larger ones? The mechanism is unclear to me.

It is interesting to plot the price of oil over these periods.  There is a correlation with both 2014 and 2019, which would seem to indicate that the world economy does better with a higher oil price.  But of course this may be a consequence, not a cause.

Oil prices last ten years, from https://www.macrotrends.net/2516/wti-crude-oil-prices-10-year-daily-chart

Perhaps you can think of another correlate. Please leave a comment below, and a chart if possible.

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