Debunking The Reasons To Go All-In On U.S. Stocks

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The U.S. market appears expensive, yet many investors miss an opportunity to diversify globally. We explain the benefits.

. An important one is the current rich valuations of U.S. stocks. The U.S. market currently trades at 20x-30x earnings depending on whether you look at recent earnings or a longer run of history. The more you pay for a stock relative to its earnings, the more expensive it is.The current U.S. valuation is pretty high compared to the past century. It's more frequently been at half the current level. Also, if you think the U.S.

This means if you put a dollar into a global fund, more than half of that money will be invested in the U.S. In recent history the U.S. share of global markets has moved around and sometimes been closer to 40%. That's a lot lower than current levels. You could consider managing your own U.S. exposure by combining owning a global fund and a U.S. market tracker. By blending these two funds in a portfolio, you can make sure the U.S. exposure is where you want it, rather than drifting with current valuations.Another way to think about the U.S. market weight of approximately 55% is to compare it with other metrics. The U.S. represents, which is a measure of economic activity. The U.S. also has around 5% of the global population.

 

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