American exceptionalism

Earnings growth in the US will be faster than anywhere else in the world

- AKASH PRAKASH

There has been a series of articles and comments by numerous market observers on the United States (US) equity market, and the near-universal belief that it is the only market worth investing in. Most of these market observers are of the view that the US is in a bubble and we are seeing peak US bullishness. The consensus remains overwhelmingly positive on the US and many global investors have given up looking at other geographies like emerging markets (EMs). The EM asset class currently has serious challenges in trying to remain relevant. Much of the global outlook for 2025 and beyond continues to believe that the US is the only market really worth spending time and investment dollars on.

Looking at the data, it is easy to see why everyone is positive on the US, and why the contrarians are deeply uncomfortable with the current level of positive sentiment towards US assets. American equities have massively outperformed those in all other geographies, generally over the years but especially so after the global financial crisis (2008). Since the beginning of 2010, in the 15 years till the end of 2024, the US markets have outperformed MSCI World equities in 14 of the 15 years. The only exception is 2017 (the first year of the Trump administration). Since 2010, US equities have outperformed MSCI Developed and EMs (ex-US) by 3.5 times. Over the past 10 years, the S&P 500 has outperformed European equities by 7.7 per cent annually and EM equities by 9.7 per cent annually. Truly exceptional numbers!

The US today accounts for about 67 per cent of the MSCI World equity indices, meaning that corporate America is worth more than twice all other markets combined! The next biggest market is Japan, with an index weighting of only 5 per cent.