bligh wrote: ↑Tue Aug 14, 2018 7:52 pm
Seriously though, I wouldn't bet against the US. Yes, every party comes to an end, but parties can go on much longer than you can imagine. Even if the US lasts half as long as the Roman empire, it would sill have a good 200 years ahead of it.
Depends on your dating of the Fall of Rome
. Note that the Roman Republic lasted a lot shorter time. The Roman Empire was very different - it was deliberately multicultural (making citizens of prominent members of *all* the subject peoples) and latterly Rome was capital in name only - the real capital was along the Danube and Rhine frontiers. The crisis of the 3rd C AD would make anyone sit up and notic.
The reality is the USA is clearly a late phase part of a European imperial diaspora which began in roughly 1492 and came to an end in the 20th century. The Spanish, Portugese, French and British Empires begat the subject nations. Now the wheels are slowly reversing.
The USA is likely to remain a very important country just to have more rivalry -- from India and China in particular. Nigeria the problems are manifest and so its rise is further away and the situation is foggier - but it's definitely a possibility.
This does not have much to do with the level of the US stock market, though. Capital markets are global. Consider the UK-- 70% of profits of FTSE companies are earned in foreign currencies. We happen to have the HQs of a lot of multinationals.
Too many people have too gloomy an outlook for this country and I think they are wrong. There is a difference between underweighting the US and market weighting it. When you go 50/50 US/exUS you are market weighting the US. If you are going 80/20 you{ are overweighting it and if you are going 30/70 you are underweighting it. I think underweighting the US is making the same mistake as overweighting it.
Generally, yes. One should not underweight the US.
There is a portfolio theory point, though. Your assets as an American are in USD - your home equity, your labour income, your Social Security and other retiree benefits. Thus overweighting foreign markets is something of a diversification.
It's difficult to know how far to take that. Many internationally listed companies are big USD players and / or heavily weighted towards US business (think Glaxo Smithkline in pharma, or BP in oil & gas). So a US investor does not gain much in that sense by international diversification - they gain something, but it's not as large as it might otherwise be.
You do get more exposure to EM - European companies for example are relatively EM tilted in their revenues, compared to US listed cos (that graph has been on a thread here). By owning HSBC for example you get massive exposure to Far Eastern banking, proportionately greater than any US bank.
I think the main issue is a sectoral one. The US stockmarket is heavily healthcare and technology weighted. By contrast, it has a low weighting in natural resources (especially ex energy)-- the world's main mining companies are listed in London, Brazil, Australia, not USA.