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U.S. stock market superiority
Decades of U.S. market dominance
Since WWII, U.S. economic strength has translated into higher market valuations and profitability than the rest of the world. But long-term outperformance does not predict future winning streaks.
6 of 10
THE U.S. LAYS CLAIM TO 6 OF THE TOP 10 MOST PROFITABLE STOCKS GLOBALLY.
Bloomberg, Forbes Global 2000 List. Profit measured by net income reported for the trailing 12-month period.
68%
THE U.S. MARKET HAS RAISED ITS SHARE TO 68% OF GLOBAL MARKET CAP.
Fiscal Monitor Database of Country Fiscal Measures in Response to the COVID-19 Pandemic, International Monetary Fund, as of October 2021.
The drivers of outperformance
Maintaining a leading edge can be attributed to factors that relate directly to economic resilience.
1
Valuations
Innovation and policy response in the past two recessions fueled U.S. stock valuation expansion.
2
Profitability
The superior U.S. stock profit profile is responsible for about 16% of cumulative U.S. outperformance since 2007.
1.2% divided by 7.4% outperformance.
3
Currency and liquidity
The strength of the U.S. dollar and the magnitude of fiscal and monetary stimulus has supported U.S. stock market returns.
Is the U.S. market overpriced?
While stock valuations have increased as a result of the nation’s innovative advantage and favorable borrowing environment, there is still great profit potential for U.S. companies, offering the opportunity to grow into those valuations over time. The U.S. market does not look overly expensive. But multiple expansion relative to the rest of the world would likely require a new catalyst and should not be counted on as a singular driver of returns.
Meghan Shue
Head of Investment Strategy
LOOKING AHEAD
Despite a very concentrated equity market and a growing political divide in Washington, we remain optimistic on the prospects for U.S. economic and market leadership long term.
Watch our 2024 Capital Markets Forecast Highlights to hear Head of Investment Strategy Meghan Shue talk about what he sees for the year ahead.
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