Morningstar has recently published new research on the revenue exposure of the major global stock indexes, calculating where companies' actual revenues come from around the world, rather than just their country-of-domicile. As examples, Microsoft is domiciled in the U.S., but makes 50% of its sales overseas, including 25% in emerging markets. Nestle is headquartered in Switzerland, but receives 35% of its revenues from the United States. Morningstar has now consolidated all this global data.
Shown in the charts and table below are rough estimates of the revenue exposure of various market-cap mixes of U.S. and international stock indexes typically found in a passive investor's portfolio. At left is the revenue exposure of an all-world market-cap stock investor, at right is the revenue exposure of an all-U.S. market-cap stock investor, with gradations in between.
Note: All-world is MSCI All Country World Index; all-U.S. is Vanguard Total Stock Market Fund; as of 9/30/18.
A few observations:
- 1. From the perspective of company revenue, an all-world stock investor has only about a 42% exposure to the U.S. economy — far less than the 55% percent suggested by the current U.S. market cap.
2. An investor with a 75% U.S./25% international allocation has about a 50% revenue exposure to the U.S. economy.
3. All equity investors today have international exposure, even U.S.-only investors, due to global sales revenue.
Any thoughts on all this?