Why you shouldn’t bet against the US stock market

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America is likely to remain the captain of the fourth industrial revolution

Much has been said about the degree to which US stocks have outperformed their global counterparts. Over the past 10 years owning US stocks has returned 13% compounded per annum , versus 5% for the rest of the world.

Three factors drive stock returns: the dividend yield when you purchase it; the rate at which it grows its earnings ; and the price-to-earnings multiple that the market is prepared to pay for the stock . The problem with mean reversion in this context is that it is not alert to paradigm shifts. It assumes all forces driving stock returns are cyclical in nature. We would argue that this is not the case.

 

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