The dominance of the U.S. stock market relative to other equity markets over the past 15 years can be an enigma for any investors who were taught to believe in international diversification. As shown in the accompanying chart, U.S. equities have outperformed international equities in most years since the 2008 Financial Crisis. In the process, the U.S. market’s capitalization has gone from being on par with that of both Europe and Asia to being roughly three times greater.
An October 30 Top of Mind commentary by Goldman Sachs interviewed leading researchers to glean their insights about whether U.S. outperformance is at a turning point. A diversity of opinions was presented, but there was widespread agreement among the participants that the technology sector was an important factor contributing to the U.S. market’s outperformance. The reason: Tech is by far the most important sector in the S&P 500 index — representing 28% of the weight — versus 7% for the MSCI Europe index and 13% for the TOPIX in Japan.
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