Valuations are very much driven by domicile because local investors tend to behave very similarly. So there we have dependence on how the people and investors value companies in the region.
Actions (good or bad) by governments drive the sentiment of whole market in the region.
Since I mainly use index funds, 62% investment in US, also means a very high concentration on top 10 US companies
Hence for risk mitigation purposes I kept my US allocation to 50% max for equities. To be honest , it’s still too high but since rest of the world have less number of public companies, it’s tough to reduce US exposure to 25%
Yes, there is a discussion in the Rational Reminder community about this topic. Mike Green pushes these ideas, but there is no strong academic evidence to substantiate them. The ERP puzzle is still pointing out that the stocks are cheap.
Nothing, except that it leaves less than 40% for the rest of the world. I only recently updated my old 50% allocation to 60%. But yeah, more or only US only would have run better.
This opinion nails it: " Should investors just give up on stocks outside America?
No, but it is getting a lot harder to keep the faith"
Here’s a chart from it US vs. Europe:
I think this would only get corrected in a crisis. For example AI companies failing to deliver value, a recession in US or something very serious like GFC.
Until then, recency bias and US centric investment philosophy deployed by US investors as well as international investors would keep the divergence going. As this basically feeds on itself
We can make a similar chart to compare other sectors of US too. And of course if Mag 7 had an ETF long time back, then the headline would have been 70% of your portfolio is not working for you.
Agreed, even on more levels. The top universities, skilled workforce in some sectors, the local market, and yes, the access to capital for anyone with a good idea. Will be interesting to look back in 10 or 20 years and see if they can keep it up, or rather how other regions can keep up.
Maybe I’m biased, since Economist and Blick online are my main source of trustworthy, quality news, but it sometimes feels like even other reputable news outlets wait for their weekly copy and then go from there…
Don’t you think that what you are doing is a pure hindsight effect? Why don’t you look at World ex CH vs. CH, for example?
How many economists were able to predict US overperformance in 2011? I think it was more or less when the world stock markets were getting out of what I remember as “subprime crisis”.
Folks don’t you get bored of this? r/bogleheads has had a “'murica fak yeah or not” thread literally daily for the last 3 years that I’m following. Part of the reason why I am no longer following that sub.
Warren? Though he’d probably be offended to be called an economist …
I’ll quote from his 2011 letter to the shareholders:
America’s best days lie ahead.
Ok, ok, the part about his prognosis of the S&P 500 outperforming the rest of the world for the next decade or so was last-minute edited out from this letter.
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