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Today, US companies account for 61% of the $60tn MSCI index, a considerable rise from less than 50% a decade ago. The ten largest stocks now constitute almost 19% of the index, a substantial increase from 8% in 2013.
However, global stocks have experienced instability over recent months due to concerns about interest rates and geopolitical risks such as the Israel-Hamas conflict. US stocks currently trade at about 18 times their expected earnings over the next year, compared to 12 times for the MSCI all-country excluding US stocks.
In this climate, Max Gokhman from Franklin Templeton Investment Solutions and Jurrien Timmer from Fidelity have both suggested that non-US stocks being cheaper does not necessarily mean they will outperform. They caution that the “magnificent seven” could face pressure if they fail to demonstrate tangible benefits from AI growth next year. However, they also suggest that growth stocks could see benefits when interest rates start to decline.
In related news, OpenAI, the group behind ChatGPT, is currently discussing a share sale with investors that would value it at about $86bn, tripling its value since April.
The ongoing dominance of US firms in global markets has sparked concerns about a potential US monopoly. This could potentially drain liquidity from other markets and incentivize companies to relocate their listings for higher valuations and trading volumes in the US.
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