Hi Ford,
I am a bit irritated about your claim "...that long‐term investments in broad-based international indices add less value to a portfolio than in the past" and that investors should "...consider adjusting their allocations accordingly" only reasoned on higher correlations.
Isn't that plain recency bias, applied to market timing? This is not directly known as a winning investment strategy. What if mean reversion steps in soon for the coming 20 years, reversing the performance lead of US back to international equities for decades? This has happened quite so often in the past.
Overall, there was no significant difference in performance between, e.g., US and UK equities during the past 100 years but huge swings, sometimes taking several decades to reverse. But they always did reverse! On 07 February 2019 Joachim Clement showed this in his CFA article "Diversification: High Dispersion Beats Low Correlation":
https://blogs.stage.cfainstitute.org/investor/2019/02/07/diversificatio…
This is mainly due to high dispersion between US and international equity indices. Thus, he warned, contrary to this article here: "That’s why the focus on correlation over dispersion is shortsighted.[!] It ignores the material diversification benefits that can be achieved with assets that seem to move in tandem even though the steepness of the trend might vary considerably..."
Is there still no consensus between the experts, how to diversify well? Intuitively, Joachim's approach to focus on large dispersion of two assets in order to maximize diversification makes much more sense to me as a long-term investor. In particular as a retiree, I would prefer an even performance development over long time periods of decades. This can be achieved best if assets with high return dispersion but equal long-term average returns, as US and international equities offered for the past 100 years, are combined with similar allocations and rebalanced regularly. I would just stick with such an intuitively sound diversification.
Can you please comment on this contradiction.