This guy thinks otherwise. Essentially he argues that due to countries needing to conduct huge investments in the coming years, they will seek to repatriate capital currently invested in foreign countries so it can flow into new domestically-issued debt instead, pulling down the foreign countries’ markets.
Napier: … Die beiden größten Verlierer der neuen Kapitalströme sind die USA und Frankreich. Der französische Negativsaldo beim Portfoliovermögen beträgt 43 Prozent seines BIP, in keinem anderen großen Industrieland gibt es Vergleichbares. …
Frage: Das passive, indexorientierte Investieren ist seit Jahren auf dem Siegeszug. Sie glauben, dass der ETF-Boom enden wird?
Napier: Ja, darauf spitzt es sich zu. Für viele Menschen besteht das Investieren heute aus dem MSCI World Index. Das ist gefährlich. Erstens enthält der MSCI World rund 70 Prozent USA. Das zweite Problem ist: Wir hatten eine lange Phase, in der physische Assets an Bedeutung verloren und der Verschuldungsgrad der Unternehmen stetig stieg, besonders in Amerika. Das muss jetzt rückgängig gemacht werden. Solche großen strukturellen Veränderungen gibt es nur alle 30, 40 Jahre. Aber wenn es passiert, dann ist das Letzte, was Sie haben wollen, ein Index, der alle bisherigen Gewinner versammelt.
I don’t read Spiegel, but guess magazines like that always have an expert at hand to cite for an article. Too much US or tech isn’t quite new. Eventually, one of them will be right.
Not sure I get the conclusion from this short quotes, though. Is he predicting upheaval in global or US stock markets due to changing capital flows? Or in ETF investing? To me, ETFs are just a vehicle, but guess the interviewer uses that as synonyms.
Then it mentions too much debt, but at the same time more is required (or elsewhere) to invest in physical assets? Physical assets need to be built and eventually yield a return. It does mention 2 biggest losers, implying there’s also winners? Is that countries, or companies?
It’s interesting to read those arguments, though. Even when it’s sound plausible, it reminds me that I have no clue what the markets will do short- or mid-term. Which reassures me that passive investing in global markets remains the way to go for me
Yes, that is why I’m curious about what this group thinks.
He is predicting broad changes of capital flows away from US (and France, and perhaps others that have benefited from them) due to those funds needed at home - this is seen as a broader trend, see NATO members’ recent commitment to spend 5% of GDP on defense. In Germany’s case, large investments in defense and infrastructure:
The outgoing lower chamber of the German parliament, the Bundestag, voted on Tuesday to amend the country’s constitution and clear the way for a historic debt-funded investment package which could run to €1 trillion or more in higher military spending and investments in the country’s ageing infrastructure.
This would be pulling down the other markets - stocks and bonds.
Probably not ETFs as a vehicle, but the idea to invariably invest large amounts in the US markets’ “winners” of yesterday.
The simple theory would be that all those possible changes and risks are already priced in. My investment isn’t intentionally US-heavy, it’s just happens to be the largest market.
Maybe in the future, US tech stocks go down, but European construction or Australian natural resource stocks go up, who knows?
Eventually, a good infrastructure will benefit economies as a whole and result in future growth, no matter where the capital is coming from. And just as example, data centers are an asset, as well and likely just as important for economies as rail ways or power grids.
Either over- or under-weighting any particular market to me is a different investment approach.
Maybe some actually do know better then everyone else themselves, identify a fund manager or expert that does, or just get lucky and manage to outperform the market. Nothing wrong with that, just not for me.
One of the biggest reason why US stocks have done so well over the last decade is of course big tech. But also US market was seen as a sure thing and foreigners felt quite comfortable investing there. This additional flow of money pushed valuations higher too.
The big tech is still going to be big. But the second part of “being certain” is not true anymore. We can think what we like , we can call it temporary, but I think we would see higher allocation to domestic stocks (by foreigners) just because this new feeling of uncertainty has crept in
The US as a massive debt but still a dominant position in our capitalist system with a strong currency and strong défense system.
For now most investors feel safe to invest their pension fund with them.
All binational treaties advantages US corporations especially during acquisitions/takeover.
No one knows for how long but if you feel unsafe or not satisfied with this balance you could set an investment plan that amend ACWI market shares.
My main position is still VT but I also own 15% of my portfolios in VEUR as an home biais.
I try to limit my US exposure to 50% for my equity portfolio. But I have to be honest, I would have preferred that it was not like this and global market cap float was more evenly distributed
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