Investment trust insider on the end of US exceptionalism – James Carthew: Investment trusts for the end of US dominance
Scottish Mortgage is one of several global investment trusts that are notably underweight North America.
In recent weeks, the number of commentators suggesting that US exceptionalism is dead, the US economy is in trouble, and the so-called ‘Big Beautiful Bill’ may put a hole below the waterline of US finances has been multiplying. You might think that alarm bells would be ringing in US equity markets. However, the S&P 500 has continued its steady recovery from the tariff-related turmoil of early April and is now up year-to-date.
The move means that the leading US index is trading on a price/earnings (PE) ratio of about 25.3x, which compares to just 13.3x for the FTSE 100. US-listed stocks account for almost two thirds of the MSCI All Countries World Index (MSCI ACWI). If you strip them out, the World ex-US Index is on a PE ratio of 16.5x versus 21.5x if they are included.
Clearly, if confidence in the US market cracks, ETFs that track global indices are going to be hit hard. Those global trusts that have an asset allocation that does not depart too far from that of the MSCI ACWI would also suffer.
We often question why it is that US stocks are so highly prized relative to those in other markets. The recent news that Wise (WISE) – which in a small way is still a feature in Chrysalis’s (CHRY) portfolio – is considering moving its primary listing to New York from London illustrates the point. It argues that by making itself more accessible to US investors, it will attract more interest in its shares, which will drive up its rating.
Over decades, in the UK and… read more here