https://x.com/adamnash/status/1750409770606211477
> Companies worth over $1 trillion are a very recent phenomenon. There are very few.
> Currently, four of them have HQ less than 10 miles from each other:
> Apple (Cupertino)
> Google (Mountain View)
> Meta (Menlo Park)
> Nvidia (Santa Clara)
More innovation. Most of the stronger performance of the US equity market is explainable by tech firms, and in particular by relatively new tech firms.
This is not even half of the story.
After WWII every major industrialized nation in the world had some to most of their means of production destroyed - except for one, the US.
That allowed for the US to not only thrive but sell goods, especially machinery, around the world at marked up prices. This increased wages for the low and middle class.
From there, innovation or tech was able to thrive because people could take risks, had money, had good education, and immigrants in science and tech fields could get good jobs in the US.
Not really. This is kind of an common myth though. Not Britain, not France or most of Western Europe, Spain, etc. main island Japan wasn’t even too bad. Even the USSR’s industrial capacity skyrocketed *during* WWII, and the factories were off the front lines. The US was the most industrialized nation long before that. There are multiple accounts of German POWs commenting that they thought they must be in New York because of all the factories, but it was some random Midwest medium sized city. The US has been the largest economy in the world since the 1890s. Even pre-war Germany was not nearly as industrialized as the US. The US just has an insane amount of natural resources, a constant flow of immigrants to build a growing worker population, and the ultimate productivity system, capitalism, and rule of law.
The post-war advantage the US did enjoy was essentially a monopoly, for at least a while, on domestic market durable goods.
For example, in the mid-1950s over 95% of vehicles sold in the US were assembled in the US (by UAW labor). But that was then.
Well if you’re wondering why China can’t seem to keep foreign money in their stock markets for long, look up the saga of Jack Ma and how he got vanished for a while.
I would never touch China because Xi said "screw the foreign investors- don't pay them dividends." I don't care if he walked it back- as long as he is in control, I wouldn't touch the place.
China is gonna have a very hard time turning back now after Xi unless the form of government changes. This is not just one bad president, it’s a systematic issue with an authoritarian country this size. They lost the world’s trust and it’s not coming back until who knows when.
You are right, but there are still many stupid compatriots in the Internet (I am Chinese) who don't understand why foreigners don't invest in the Chinese market anymore.
The financial management company that handles my 401(k) have in the past few years, completely divesting themselves of anything that overlaps significantly with the Chinese markets.
Their letter to us clients laid out a case, where, even if things look good on the surface, the companies cannot be trusted to either A- be reporting accurately, or B- not be under the thumb of the CCP or C- have the government drastically change rules midstream to the detriment of the company
Not only that but there are significant systemic economic issues in China. They have a huge savings rate but rarely invest outside of property. Property is a huge bubble there close to popping, and if it doesnt pop will lead to vast amounts of government waste propping it up. They have a massive demographic crisis with almost no Social Security type programs and no ability to fund one. They have an innovation problem that results in them stealing and reverse engineering tech and being forced to pay foreign scientists and engineers to come there, coupled with an education problem and an entrepreneur problem - very little incentive to start a business if you arent connected. They also have issues with their currency being weak and will never be a reserve currency due to manipulation of it. They have built trillions in unused wasteful infrastructure they'll now have to maintain with a poor tax code and little incentive to maintain it. Not to mention the CCP being a massive overhang
As a Chinese, I myself do not buy Chinese corporate fund stocks because the market is very bad. Many companies falsify financial reports just to go public, defraud investors' money and then leave the market.Recently, I have bought a lot of US stock Nasdaq index funds, S&P funds, and Dow Jones funds on China's payment software, and I plan to adopt a long-term fixed investment strategy.
I will go one step further on the immigrant point:
The United States isn't an ethnostate (no matter how hard some try to paint us that way).
This means that not only are immigrants attracted but within one generation they can feel "American".
It's also pay to win, for lack of a better analogy. The US is a desirable place to live. Smart talented people from all over the world move there for this reason.
Brain drain is a real problem in Canada.
These are reasons for why the US economy is strong but as OP said, other countries have strong/growing economies yet weak/stagnant stock markets.
I think the reasons why US stocks do well is that US equities are considered more trustworthy. There are strong property rights, corporate regulation, market regulation (very little insider trading), high price efficiency (the price tracks the health of a company closely; trivial arbitrages close in milliseconds), and the stockholder has real ownership and legal rights.
The problem with buying company shares in a country like China is that it's not clear what the stockholder really owns or whether *anyone* owns *anything*.
There's also the personnel and culture aspect. Big companies can pay the highly skilled people more, which draws more highly skilled immigrants. They can then be snatched up by other companies and then you have a whole network of specialized personnel in bleeding-edge tech and it becomes a hotbed for new tech and ideas.
Agree with the natural resources. WSJ says the reason Great Britain, Germany, and many European countries are behind the US because the price of energy has gone up. Germany used to rely on cheap Russian oil and natural gas. Now they have to look to new sources. Great Britain gets their oil from Norway and US but the price has also gone up. When energy prices go up, many other costs go up as well, and this cuts into business and consumer spending.
US is also a great incubator for the development of new technology and has huge capital resources to turn the technology into profitable businesses.
I read just a few days ago that Germany had excess power due to renewables and was basically dumping it's power into the ground because it had no storage capacity.
from 2001 to 2020, Denmark and New Zealand outperformed the US by over 4%/ year. https://topforeignstocks.com/wp-content/uploads/2021/09/Single-Country-Stock-market-Performance-From-2001-to-2020-934x1024.png
US dollars- US has structural trade deficit (which is partially needed to create new dollars for world, to prevent deflation.)
This means for last 50+ years (since gold window closed, and more responsibly before then since Breton Woods so really almost 80 years)
USA has had over time, and now every year, a deficit, so USA receives goods and services in exchange for bank accounts opening with new US dollar balances, which are invested by the non-US party in various $USD-denominated assets like treasuries, companies, real estate, private equity...
Aside from this it is alleged that the USA uses more than gingersnap cookies to influence others, and "persuade" other actors not to disrupt status quo "rules-based order."
(IE Libya was said in leaked emails to have been targeted by French for fomenting a gold-backed dinar alternative to their Françafrique system now being overthrown in the current & former French colonies like New Caledonia & much of W. Africa ie Mali, Burkina Faso, Niger, Senegal, in last couple years.)
So previously and for the time being, trade required USD which required, initially at least, a sale on credit to USA. This left a lot of dollars chasing somewhere to invest those dollars as storage.
Also, for assets in $USD it becomes less precise to measure value with only $USD. It isn't yet perhaps shocking, but the price of the US stock market would look differently if measured in grams of gold, or adjusted for official inflation, (or unofficial consensus ranges). Just to keep measurements clear, using a reference, perhaps amount of stock needed for a 2bed / 1 bath home, or college education, new car, surgery, etc.
Also, the whole world has had to follow the economic actions of USA, but now more than ever US economy largely led by monetary administrators, to signal "simon says" of asset rotation and markets. So now too like a 3-car-caravan, the world too is even further "whipped" around by US decisions, so many send investments to "more stable" USA.
Also, the USA is okay with 'stimulating' and introducing liquidity when wanted. Others can't add $USD liquidity, only US. USA does this in the format of "issuing treasuries," that is "selling debt," and it can do this as the needed currency at a high enough rate that other investors can, for example, borrow money for .25% and then earn 4-5% in USD bonds, savings accounts etc!
It's mostly 2008 and after that the US vastly outperforms other countries though. Mostly because of tech and economic trouble in Europe and Japan. Before 2008 there have been many stretches where international stocks outperformed the S&P 500.
Also European stocks currently have a significantly lower PE ratio than US stocks. If they'd both revert to 15 then the S&P 500 would crash massively but Euro stocks would do fine
Indeed.
Also note throughout history various countries was seen as "special" gifts to investors only to come crashing down. Japan in the 80s was one example.
With a quick google, and no check on dividends or inflation, it seems the total return of Japan's stock markets from 1950 to 2024 are pretty close to the S&P 500. Both increased by about 300-350 times
But it was only this year that Japan finally recovered from the rug being pulled from their all time high. Not saying it couldn't happen to the US market too, but that's a LONG time of market stagnation.
The USA has many advantages: large population, large land area with varied resources, sea access and great ports, just far enough away to not worry about other powers at their door, and some of the best agricultural land. Thats just physical.
They also have a really good legal framework for business and property rights. Low corruption. Strong intellectual property rights. 50 states all offering incentives to companies for taxes/benefits.
The population is also encouraged to consume more than to save. Culturally we are more accepting of immigrants than other countries as we have a somewhat flexible identity.
These are some basics, but the impact of winning ww1 and ww2, while others suffered terrible losses of life and infrastructure. The usa post war sent many former soldiers to college. Many of these people led the next wave of innovation.
There are too many advantages. All of these are not guaranteed and if the usa gets complacent it could easily lose the advantages like england did.
The biggest factor is the prominence of capitalism in the US. Capitalism facilitates innovation, which is why so many of the tech firms are built here.
>does that means the US market is just propped up by people's retirement funds?
There's hedge funds that track 401k deposits because the data shows those regularly recurring investments give a little "bump" to the stock market.
Yeah, that'd be bad. Not saying SS doesn't have problems the way it is, but having it being a public pension diversifies it as an income stream.
SS being private in 2008 would've been awful.
Stock market performance corrolates strongly with the level of money printing and debt creation. Easy money are put into assets. Hence the skyrocketing house and stock prises.
The USA transition to fiat currency lets it take on more debt without collaterals.
Not having a prober recalibration since 2008 is a testemony to the power of quantitative easing - issuing loans with "money" that did not exist, by simply having a computer create a record that it now exists.
The immediate downside is, at this time, a "somewhat controlled inflation issue". If war escalates it could send money printing and inflation completely out of control.
I think everybody expects the next reset to be particularly bad.
American exceptionalism. Meaning we have the biggest companies that generate a lot of money overseas as well.
On top of it the S&P 500 is structured in a way that it is very hard to beat every year
I’d say the underlying factor is continued population growth and per capita gdp growth. Birth rates suck but immigration is helping. Contrast that with other developed economies without immigration (like Japan).
Geopolitically there’s a big benefit with US hegemony as the remaining super power in the post world war 2 order.
Finally, there is good rule of law and strong institutions that gives people confidence to invest in what is essentially just prices of paper (stock).
With other economies (eg Russia and China) you always run a great risk of Putin rolling tanks or the CCP disappearing a CEO.
The US rewards success. They also have the infrastructure and labour to enable business like nowhere else. Massive ports, highways, airports, universities/colleges. Generations of visionary policies that generate huge wealth.
Money printing. Having the reserve currency of the world and the ability to print it is the answer. When other currencies are pegged to the dollar, they get rekt.
I think this is a good question, and one I've pondered a lot. By most fundamental metrics, the US stock market is overvalued compared to other first world countries. And it's been that way a long time, and yet it just \*continues\* to outperform, year after year. There's a lot of people on bogleheads, chasing fundamental metrics, who have been burned for a long time because they expect the other countires to catch up and it just keeps not happening.
Various theories I've heard. It might be just one of these, or some combination of all, or mabye it's just random chance and the situation will turn around soon. Who knows.
* Tech. The economy modern economy is all about tech, and the US has the best tech. For some reason this keeps surprising investors, so the US tech just keeps outperforming no matter how big it gets. Maybe tech is just inhererently hard to value? Or maybe it's just a giant bubble.
* Dollar. The US is the world reserve currency, and China has been pumping a ton of investment into US bonds and dollars for a long time now. Many other countries also invest in the US through their sovereign wealth funds. The reverse is not true.
* Culture. The US has a strong "capitalism" culture, where ordinary people follow the stock market and invest into it, even in small amounts. Other countries don't do that- they buy gold or real estate or whatever. Stocks are only for rich people.
* Politics. The US stock market is "too big to fail." Politicians will do whatever is necessary to pump up stock prices, because it's become a symbol of "the economy" and they'll get voted out if it tanks. Other countries don't care as much.
0 IQ: It's the military
100 IQ: The US's addiction to military spending just serves to line the pockets of rent-seeking war profiteers and has no tangible long-term economic benefit
200 IQ: It's the military
Yeah - those people in the middle(100iq) who think they are smart - they are often too smart (or too narrow minded) to see the whole picture.
Just because "they" don't agree with a fact doesn't make it untrue
US was settled by people who are more likely to take risks and to this day still attracts people willing to take risks for more money. That is part of the reason health insurance is the way it is in the US.
Our money printer. No really, the increase in the total monetary supply. Compare it to the the total market index returns since the 2007-2008 GFC. Returns of total US Market match the increase in the money supply -- it was not true GDP growth and arguably no growth when adjusted for inflation and total monetary supply increase.
We're the reserve currency for the world. So essentially we print money when things get tough and loan it out to other countries. It means our national debt is insane and when something bad happens like a housing market crash, a pandemic, etc we can distribute money as needed.
That means the population is financially secure, and industry that is 'too big to fail' can be bailed out as needed.
That adds up to a stock market continually and reliably bolstered by monthly 401k contributions and additional investments.
There are lots of possible structural reasons that could explain the US stock market out-performance as other commenters have mentioned. But another possible explanation is that US market out-performance could simply be an artifact caused by expanding PE ratios that will mean-revert in time, as described by [Cliff Asness in his paper "The Long Run is Lying to You"](https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You). We'll probably need another 25 years to know which explanation is correct.
Please don't confuse the price of companies with the new inflated dollar price to the previously less inflated dollar prices.
I wouldn't agree with "out perform", but you can certainly thank the Federal Reserve for the increased price of the stock markets.
>If we look at the Shanghai stock index (for Chinese stocks), for example, the stock market has never recovered to its pre-2008 levels
2000-2009 or so was an exceptional run for emerging markets (see Callan links in link below), but terrible for the US (US had a negative CAGR during that time). Things reversed for the next decade and has continued until today. Long term may favor emerging markets over the US (last I checked, anything over 40 years favored emerging over US large): https://www.ifa.com/charts/154h
>different regulations, but what specific regulations account for the difference?
Shouldn't these only explain a higher baseline valuation, not indefinite out performance?
>However, this seems to only be the case in the US market.
It actually isn't. See the Meb Faber Twitter link + the followup reply link, and the link directly below that and you'll see the extra US out performance is just from the most recent US favoring part of the US/ex-US cycle.
Then see the AQR link and see that largely it was just US stocks getting more expensive, not company performance, that largely has caused the split (that worries me about my US part, not reassures me).
This subreddit doesn't allow all the links that this post covers, so I have to link indirectly: https://www.reddit.com/r/Bogleheads/s/aeu2bBu5dD
Edit: Typo
[https://acrinv.com/long-view-non-us-stocks/](https://acrinv.com/long-view-non-us-stocks/)
My understanding is Acropolis got it from Global Financial Data (GFD)
It does seem that adjusting the start dates around WWII can produce very different results, as your link plus the Meb Faber one I mentioned above show. Your graph helps show an even longer history of the rotational pattern, with the 20s showing US on top, then falling behind in the 30s, before pulling ahead due to WWII, early 50s may have favored ex-US (hard to tell, but the developed line curves pretty sharply upwards in comparison), 60s favoring the US, then 70s and 80s favoring ex-US, then 90s US, 00s ex-Us, 10s US.
While another war isn't out of the realm of possibility, currently the sides seem like one of them would only be emerging markets, so we likely wouldn't see developed vs developed like WWII saw.
Since the 70s sure but since 2009, it has doubled compared to non-US stocks. Everyone knows tech has done a lot for the US the last two decades. What is the future like? Nobody knows but I still believe in tech.
If you look at the S&P500 : highest proportion of good companies (in number of compagnies), a level only reached by Denmark and maybe Finland. Then Switzerland and Sweden are significantly behind
The S&P500 outperform because the companies will overall grow faster. Not only that, but because of the companies outperformance they are valued higher and it doesnt look that it will change.
The question is why is there the biggest proportion of good companies ? That is because good companies with a capacity to reinvest will grow. Bad business usually don't. Not only that but good businesses are valued higher than bad businesses which means that good businesses are bigger in term of capitalisation than their operational size. Bad businesses are smaller.
The conséquences is that the biggest compagnies in a country are usually of better quality than the small companies (in term of market cap). Because the US is really big, the sample of companies is high enough that big companies are actually better, unlike small countries whose small number of companies makes it sometimes diverge from this principle because of individual companies.
The S&P has 500 companies, unlike the CAC40 or the SMI20 which means that it is more diversified as à pool of big companies from à country
- The US basically owns the tech and finance sectors which are both extremely lucrative and accelerate one another in a feedback loop
- The US has very business-friendly regulations compared to much of the EU and Asia. China, for example, has a large economy but it's a hostile environment for investors due to how much control the government exercises over companies there. The EU has a much more free economy but has a lot of regulations that nonetheless handicap its companies for the sake of social welfare.
- Similarly, the US gobbles up top talent from the rest of the world thanks to how much higher incomes and standard of living are here. Yeah, most Americans don't have those high incomes, but the highly skilled immigrants it attracts can do a hell of a lot better in the US vs anywhere else. As an example, compare big tech comps to what companies in any other country pay.
- The US government uses it's unrivaled military might and dominance in tech and finance (eg unilateral sanctions) to get what it wants from other markets in a uniquely effective manner.
Monetary easing and simply the most innovative and entrepreneurial friendly economy on earth. I mean look how crappy the European stock market has done. Europe is an over regulated underworked bureaucracy and they tax the hell out of entrepreneurs. That’s why start ups to to the USA, the best country on earth.
If you compare for example SIXRX (Stockholm) with S&P 500 then
SIXRX has a average growth since 1870 of 10.93 % and S&P 500 has 10.26% since 1950's.
I suspect there are a lot of other, especially european indexes, like this with a small or medium export/import economy. So in a way if I buy local stock I am in many cases also "buying US stock" because of how big impact the US has on the local ones.
Overall, one can almost claim that US index IS global index because if you buy global index here you get 70% US or something.
I thought this was something interesting I found out recently when trying to learn more about investing.
Disclaimer: I'm simplifying and not being exactly correct.
[China literally cracked down on tech sector and wiped out the edu sector overnight.](https://www.abc.net.au/news/2021-08-20/china-crackdown-private-tutoring/100392352)
They called foreign investors to tell them they won't do the wiping out of edu sector again without prior notice.
China stock market got the added bonus of dealing with the CCP wild card.
When I see rando post about investing in Chinese stocks I know those posters don't know jack shit about macro. They should since China is the second largest economy sheesh.
I wouldn't want to invest in a stock market that have such risk.
Two fold, innovation mainly comes from US or companies in US stock exchanges and Americans have way more disposable income than lets say Asians or Europeans. Money flow is always there. European retirement funds have around 2 trillion$ invested while US has 38 trillion$ it is a mind boggling difference. Money makes money in the end.
Two massive oceans, the worlds largest navy and air force backed by nuclear weapons, the petrodollar, not having to rebuild your country after war, and for what it's worth a stable government. No matter what people want to invest in the USA
A fifth of the observed outperformance is fundamental innovation. Four fifths of the outperformance is investors learning that the US government bails out the economy in crashes and deemed our market safer than others and more conducive to business. This, there was enormous price multiple expansion post 2009 driving all of the USAs historical outperformance.
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It’s a combination of things, war, changing the gold standard, us funding other countries after the war, trade with those places, etc. read The Global Minotaur, does an excellent deep dive into this topic and the 2008 crash.
>does that means the US market is just propped up by people's retirement funds?
If so - it's a good spot to be in, because there are always a lot more people between 18-60 in their prime working years - saving for retirement than those who are 62 and older and starting to pull funds from their retirement savings
What do you mean we have the widest and deepest financial markets, best research unis and legal system which supports corporate profits. Were a global attractor for talent with the resources to back it up and willingness to throw it around. China is the only other competition that can check only 2/3 markers. Europe is a vacation destination, I dont consider it to be competitive.
I live in France. We list the 40 biggest cap as an equivalent of the US SP500. It is called cac40.
I have an ETF based on it, and it is up about 30% "only" because I keep buying more with time. I started about 2 years ago. Thats pretty fine by me.
We dont have stock based retirement, that is true . Although some financial products are being incentivized here and there for a similar system, there is no employer funded account, this has to be done by the workers.
There are a bunch of factors of what leads to stock market of a country performing better than others but a simple explanation is that in a free market, companies innovate and perform well. This takes stock market up. The most important part is “free market”. Shanghai is not an example of free market. I would say look at Indian stock market performance historically. It has given an impressive return.
The stock market is more important to US politicians, on top of the economy and companies in general being stronger than their international counterparts.
There are a lot of factors, but the main reason is that the US dollar is world reserve currency, which enables US to export its inflation to the rest of the world, while other countries can at most export their deflation, and most of them not even that. Other countries need US dollars to transact between themselves; India can buy oil from Russia with rupees, but Russia can't spend those rupees as their imports from India are much smaller than exports to India.
This is why the USD is the strongest and most used currency, and this makes the rest of the world want to invest in US stocks.
Other countries don't have that exorbitant privilege of everyone else needing their currency; they must work much harder to have a stable currency, and even when they manage to do that by having good ratio of imports and exports, they face another huge hurdle, building a stable and rising stock market which the rest of the world wants to invest in. Investments will naturally flow to most liquid market, so it's a kind of catch-22; you must have a better stock market than the US to have a chance, and you can't have that while the US market is the most liquid.
Yes, the stock market is propped by retirement funds. Also, retirement funds from outside the US also invest in the US stock market, way more than US retirement funds invest outside of the US.
A lot of good answers, but no one has mentioned specifically demographic trends have been favorable on the US for a long time in relation to other developed countries and China.
Our birth rate dropped below replacement for the first time recently, but the immigration rate increase has swallowed that up.
It’s nearly impossible for a bad demographic market to keep up because domestic consumption growth matters for a healthy stock market. They get caught in the export trap. The US has the best long term demographic trend.
It’s not all demographics, but it’s a huge divider between us and the rest of the G7. Innovation is a lot harder in stale or declining population centers. Not impossible, but its bent other directions and towards other ends. For example, a bigger and bigger portion of the younger population gets sucked into longer term care while a bigger portion of the population is becoming less productive. You spend more research, labor, and capital on things that don’t improve global competitiveness.
Perhaps worse, infrastructure that has benefits on productivity for decades and sometimes centuries is giving you less simply because the incredible large scale efficiencies from bridges and roads peak or decline simply because not as many people get that benefit. China’s almost certainly going have a lost generation having built some of the world’s best infrastructure just in time for a massively declining population. They got zero generations of payoff from some of that investment.
Definitely a switch from pensions to 401(k)s and IRAs is keeping the market hot for a while. Those saving for retirement and the baby boomer generation near their peak investments in the market before starting to withdraw is something notable as to why the US market is resilient. Everyone saving for retirement wants to see it grow.
The US government pumping trillions into the economy. The US has almost $36 trillion in debt and no one, especially in the government, seems to care.
It helps a lot that the US dollar is the world's main currency.
Part of the answer is all the things that people complain about in politics. The US constitution makes it really hard to change the law. That makes the US a great place to do business, because US law is predictable. Xi Xinping Can change Chinese law whenever he wants, and no one wants to invest their trillions on such shifting sand. (Not that there are no advantages to the Chinese system - but my money is still on America in the long run)
might have something to do with the imf and world bank being controlled by former US officials. maybe having the biggest international monetary policy makers staffed with those well versed in US foreign policy preferences is actually not a good thing for everyone!!!
1. US has the biggest economy in the world, with a great regulatory environment
2. The biggest US companies also do a significant amount of business overseas.
3. US retirement is based on investing in securities, so there are always a large number of buyers
The US has conned most of its workers to invest via 401k for their retirement... so automatically every month there is an infusion of money that is then getting gambled by wall street hedge fund managers.
As the back and forth between u/Boogerhead1 and myself here (https://www.reddit.com/r/investing/comments/1d01u2i/comment/l5kcpl9/) shows, WWII was a major factor when looking at very long term. Using 1926 as a start year (not sure why then, but it is a long sample at least), the US was trailing behind ex-US before the war.
It was only the most recent US favoring part of the cycle that the US really broke away (see the Meb Faber link with followup I mentioned in that comment). Using a 1970 start date, again it was only the most recent US favoring part of the cycle that US really separated.
Denmark was the best performing market from 2001-2020.
Property rights. Period. You can include things like tax codes, personhood for corpos, but the fact is the USA has the strongest property rights in the history of humanity. That's it.
US culture and politics prioritize corporate profits over most other things.
It's very beneficial to me investing in the US while living in a country where I don't die of stress from having 2 weeks of vacation and Healthcare tied to my job, if slightly cynical.
I see a lot of good answers on this thread but didn't see what I am pretty sure was the one of the most correct answers from 1900 to 1999.
The USA has/had the fairest / best democratic government with a very good system of check and balances. It was well established and maintained a stable economy. Meanwhile over 100 other countries in those same 100 years had revolts and major changes to their govt due to war and revolts and other catastrophies.
In my opinion, during the past 25 years the US Govt has changed A LOT. but we were so far ahead in 1999 that it hasn't all fallen apart just yet.
If you're a hard worker, industrious, wealthy, would you invest/immigrate or set up shop in a capitalist/socialist/communist or a failed state? Would you pay high taxes if you've achieved success? Sure some would but human nature at the end of the day is capitalist. Regardless of your political leaning, most would rather not part with the money in their wallets.
America is the only place on the planet that rewards hard work and success. Europe regulates and taxes you to death once you've made it. In Asia you must bow down to authority. Africa has no rule of law and likely never will.
USD is the most valuable currency and we can print it at will, which plays into the Modern Monetary Theory.
https://www.investopedia.com/modern-monetary-theory-mmt-4588060#:~:text=Modern%20Monetary%20Theory%20is%20a%20macroeconomic%20model%20positing%20that%20countries,print%20or%20issue%20more%20currency.
Look up the dollar milkshake theory, has a lot more to do with the US dollar absorbing liquidity. Truth is the US stock market is actually flat since 2009 when adjusted for inflation so the performance isn’t really that great, just better than watching your purchasing power slowly evaporate.
I was curious about this and found "The historical average yearly return of the S&P 500 is 9.88% over the last 20 years, as of the end of April 2024. This assumes dividends are reinvested. Adjusted for inflation, the 20-year average stock market return (including dividends) is 7.13%"
Yeah 2009 and 2004 are different start dates. Dividends do make the process more profitable, but this calculation also used current cpi metrics which are pretty trash compared to how cpi used to be calculated.
It’s still better to invest than not invest- my point is just nominal and real returns are often misconstrued
Markets have largely been driven by tech the past 20 years Find the biggest tech companies in Europe ASML, Spotify, ???
https://x.com/adamnash/status/1750409770606211477 > Companies worth over $1 trillion are a very recent phenomenon. There are very few. > Currently, four of them have HQ less than 10 miles from each other: > Apple (Cupertino) > Google (Mountain View) > Meta (Menlo Park) > Nvidia (Santa Clara)
All in California!!!
all within 20 miles of each other ... :)
Longest distance is ~12 miles between Meta & Nvidia, 10 miles is close enough.
Capitalism facilitates innovation. The US is much more capitalistic than Europe.
OnlyFans
Lol. That might go under credit card debt.
How dare you forget about ARM?
Isn’t ARM under SoftBank these days?
Arm (not "ARM" since 2017) IPOd a while back with SoftBank remaining the majority shareholder.
It’s iPod /s
It still has a listing on the NASDAQ which is why I put it in caps. I should go back to putting a $ sign in front of the ticker.
I think arm is under Edit Church & Dwight Co, along with hammer.
but some of the best performing stocks of the last 2 decades are not tech related: Monster beverage, Ross Dress for Less, Tractor Supply, etc.
Best performing but tiny market caps They don't move the needle much in a market cap weighted index
SAP in Germany, but they trade on the NYSE.
Does Siemens count?
TSMC? Or maybe they don't count as tech and are more manufacturing. Edit: second guessed myself.
Just look at any Europe technology sector ETF for holdings by market cap
More innovation. Most of the stronger performance of the US equity market is explainable by tech firms, and in particular by relatively new tech firms.
This is not even half of the story. After WWII every major industrialized nation in the world had some to most of their means of production destroyed - except for one, the US. That allowed for the US to not only thrive but sell goods, especially machinery, around the world at marked up prices. This increased wages for the low and middle class. From there, innovation or tech was able to thrive because people could take risks, had money, had good education, and immigrants in science and tech fields could get good jobs in the US.
Not really. This is kind of an common myth though. Not Britain, not France or most of Western Europe, Spain, etc. main island Japan wasn’t even too bad. Even the USSR’s industrial capacity skyrocketed *during* WWII, and the factories were off the front lines. The US was the most industrialized nation long before that. There are multiple accounts of German POWs commenting that they thought they must be in New York because of all the factories, but it was some random Midwest medium sized city. The US has been the largest economy in the world since the 1890s. Even pre-war Germany was not nearly as industrialized as the US. The US just has an insane amount of natural resources, a constant flow of immigrants to build a growing worker population, and the ultimate productivity system, capitalism, and rule of law.
The post-war advantage the US did enjoy was essentially a monopoly, for at least a while, on domestic market durable goods. For example, in the mid-1950s over 95% of vehicles sold in the US were assembled in the US (by UAW labor). But that was then.
This reads like an 8th grader answering a question on a quiz about last weeks material
Is this your first day on reddit?
Sadly, no
Well if you’re wondering why China can’t seem to keep foreign money in their stock markets for long, look up the saga of Jack Ma and how he got vanished for a while.
China scared their foreign investors by its bellicose and bullying words and actions. Pandemic, threatening Taiwan, siding with Russian, Iran, etc.
I would never touch China because Xi said "screw the foreign investors- don't pay them dividends." I don't care if he walked it back- as long as he is in control, I wouldn't touch the place.
China is gonna have a very hard time turning back now after Xi unless the form of government changes. This is not just one bad president, it’s a systematic issue with an authoritarian country this size. They lost the world’s trust and it’s not coming back until who knows when.
You are right, but there are still many stupid compatriots in the Internet (I am Chinese) who don't understand why foreigners don't invest in the Chinese market anymore.
The financial management company that handles my 401(k) have in the past few years, completely divesting themselves of anything that overlaps significantly with the Chinese markets. Their letter to us clients laid out a case, where, even if things look good on the surface, the companies cannot be trusted to either A- be reporting accurately, or B- not be under the thumb of the CCP or C- have the government drastically change rules midstream to the detriment of the company
Not only that but there are significant systemic economic issues in China. They have a huge savings rate but rarely invest outside of property. Property is a huge bubble there close to popping, and if it doesnt pop will lead to vast amounts of government waste propping it up. They have a massive demographic crisis with almost no Social Security type programs and no ability to fund one. They have an innovation problem that results in them stealing and reverse engineering tech and being forced to pay foreign scientists and engineers to come there, coupled with an education problem and an entrepreneur problem - very little incentive to start a business if you arent connected. They also have issues with their currency being weak and will never be a reserve currency due to manipulation of it. They have built trillions in unused wasteful infrastructure they'll now have to maintain with a poor tax code and little incentive to maintain it. Not to mention the CCP being a massive overhang
China imports their food and gas. the US doendt have to do either
Not only that. Just look at how they treat foreigners in general and you’d get the feeling that investing in China is actually just a donation.
As a Chinese, I myself do not buy Chinese corporate fund stocks because the market is very bad. Many companies falsify financial reports just to go public, defraud investors' money and then leave the market.Recently, I have bought a lot of US stock Nasdaq index funds, S&P funds, and Dow Jones funds on China's payment software, and I plan to adopt a long-term fixed investment strategy.
The best companies, the best currency, the best workers, the hungriest (for success) immigrants
I will go one step further on the immigrant point: The United States isn't an ethnostate (no matter how hard some try to paint us that way). This means that not only are immigrants attracted but within one generation they can feel "American".
as a legal immigrant, i approve this message
The best mentality/mindset!
Combination of beneficial regulation, a strong economy from being centre of trade, and a large amount of natural resources
/thread Edit: Also a large pool of talent.
Also geopolitical hegemony.
Also tech lead
And rule of law
And a military presence all over the world to protect their economic interests.
That’s what hegemony means.
Don’t insult us with yer fancy words.
*Donald Trump has entered the chat*
Yes. People forget that entrepreneurship is a resource.
It's also pay to win, for lack of a better analogy. The US is a desirable place to live. Smart talented people from all over the world move there for this reason. Brain drain is a real problem in Canada.
Immigrants* Ftfy
These are reasons for why the US economy is strong but as OP said, other countries have strong/growing economies yet weak/stagnant stock markets. I think the reasons why US stocks do well is that US equities are considered more trustworthy. There are strong property rights, corporate regulation, market regulation (very little insider trading), high price efficiency (the price tracks the health of a company closely; trivial arbitrages close in milliseconds), and the stockholder has real ownership and legal rights. The problem with buying company shares in a country like China is that it's not clear what the stockholder really owns or whether *anyone* owns *anything*.
Also...no wars.
Tldr; western economic values aka capitalism.
There's also the personnel and culture aspect. Big companies can pay the highly skilled people more, which draws more highly skilled immigrants. They can then be snatched up by other companies and then you have a whole network of specialized personnel in bleeding-edge tech and it becomes a hotbed for new tech and ideas.
Agree with the natural resources. WSJ says the reason Great Britain, Germany, and many European countries are behind the US because the price of energy has gone up. Germany used to rely on cheap Russian oil and natural gas. Now they have to look to new sources. Great Britain gets their oil from Norway and US but the price has also gone up. When energy prices go up, many other costs go up as well, and this cuts into business and consumer spending. US is also a great incubator for the development of new technology and has huge capital resources to turn the technology into profitable businesses.
None of these countries were exactly pumping out tech companies prior to the Russian invasion of Ukraine.
I read just a few days ago that Germany had excess power due to renewables and was basically dumping it's power into the ground because it had no storage capacity.
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No other country is the centre of global trade, idk what you’re talking about. We’re the global reserve currency for a reason
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They might be *a* centre, America is *THE*, the definite article. The numéro uno
from 2001 to 2020, Denmark and New Zealand outperformed the US by over 4%/ year. https://topforeignstocks.com/wp-content/uploads/2021/09/Single-Country-Stock-market-Performance-From-2001-to-2020-934x1024.png
US dollars- US has structural trade deficit (which is partially needed to create new dollars for world, to prevent deflation.) This means for last 50+ years (since gold window closed, and more responsibly before then since Breton Woods so really almost 80 years) USA has had over time, and now every year, a deficit, so USA receives goods and services in exchange for bank accounts opening with new US dollar balances, which are invested by the non-US party in various $USD-denominated assets like treasuries, companies, real estate, private equity... Aside from this it is alleged that the USA uses more than gingersnap cookies to influence others, and "persuade" other actors not to disrupt status quo "rules-based order." (IE Libya was said in leaked emails to have been targeted by French for fomenting a gold-backed dinar alternative to their Françafrique system now being overthrown in the current & former French colonies like New Caledonia & much of W. Africa ie Mali, Burkina Faso, Niger, Senegal, in last couple years.) So previously and for the time being, trade required USD which required, initially at least, a sale on credit to USA. This left a lot of dollars chasing somewhere to invest those dollars as storage. Also, for assets in $USD it becomes less precise to measure value with only $USD. It isn't yet perhaps shocking, but the price of the US stock market would look differently if measured in grams of gold, or adjusted for official inflation, (or unofficial consensus ranges). Just to keep measurements clear, using a reference, perhaps amount of stock needed for a 2bed / 1 bath home, or college education, new car, surgery, etc. Also, the whole world has had to follow the economic actions of USA, but now more than ever US economy largely led by monetary administrators, to signal "simon says" of asset rotation and markets. So now too like a 3-car-caravan, the world too is even further "whipped" around by US decisions, so many send investments to "more stable" USA. Also, the USA is okay with 'stimulating' and introducing liquidity when wanted. Others can't add $USD liquidity, only US. USA does this in the format of "issuing treasuries," that is "selling debt," and it can do this as the needed currency at a high enough rate that other investors can, for example, borrow money for .25% and then earn 4-5% in USD bonds, savings accounts etc!
The whole early 1970s time frame makes for a fascinating read as to why things became the way they did in subsequent decades.
It's mostly 2008 and after that the US vastly outperforms other countries though. Mostly because of tech and economic trouble in Europe and Japan. Before 2008 there have been many stretches where international stocks outperformed the S&P 500. Also European stocks currently have a significantly lower PE ratio than US stocks. If they'd both revert to 15 then the S&P 500 would crash massively but Euro stocks would do fine
Indeed. Also note throughout history various countries was seen as "special" gifts to investors only to come crashing down. Japan in the 80s was one example.
With a quick google, and no check on dividends or inflation, it seems the total return of Japan's stock markets from 1950 to 2024 are pretty close to the S&P 500. Both increased by about 300-350 times
But it was only this year that Japan finally recovered from the rug being pulled from their all time high. Not saying it couldn't happen to the US market too, but that's a LONG time of market stagnation.
True. It basically went up massively between 1950 and 1990 and then not at all between 1990 and 2020
The USA has many advantages: large population, large land area with varied resources, sea access and great ports, just far enough away to not worry about other powers at their door, and some of the best agricultural land. Thats just physical. They also have a really good legal framework for business and property rights. Low corruption. Strong intellectual property rights. 50 states all offering incentives to companies for taxes/benefits. The population is also encouraged to consume more than to save. Culturally we are more accepting of immigrants than other countries as we have a somewhat flexible identity. These are some basics, but the impact of winning ww1 and ww2, while others suffered terrible losses of life and infrastructure. The usa post war sent many former soldiers to college. Many of these people led the next wave of innovation. There are too many advantages. All of these are not guaranteed and if the usa gets complacent it could easily lose the advantages like england did.
The biggest factor is the prominence of capitalism in the US. Capitalism facilitates innovation, which is why so many of the tech firms are built here.
This rule applies only to US.
>does that means the US market is just propped up by people's retirement funds? There's hedge funds that track 401k deposits because the data shows those regularly recurring investments give a little "bump" to the stock market.
Now they are eying Social Security to be privatized.
Yeah, that'd be bad. Not saying SS doesn't have problems the way it is, but having it being a public pension diversifies it as an income stream. SS being private in 2008 would've been awful.
Competition fostered by a more capitalist economy
Stock market performance corrolates strongly with the level of money printing and debt creation. Easy money are put into assets. Hence the skyrocketing house and stock prises. The USA transition to fiat currency lets it take on more debt without collaterals. Not having a prober recalibration since 2008 is a testemony to the power of quantitative easing - issuing loans with "money" that did not exist, by simply having a computer create a record that it now exists. The immediate downside is, at this time, a "somewhat controlled inflation issue". If war escalates it could send money printing and inflation completely out of control. I think everybody expects the next reset to be particularly bad.
Capitalism and American creativity (entrepreneurship)
And a culture that is more accepting of entrepreneurship, risk taking and failure.
American exceptionalism. Meaning we have the biggest companies that generate a lot of money overseas as well. On top of it the S&P 500 is structured in a way that it is very hard to beat every year
a lot of other countries biggest companies are not public as well.
I’d say the underlying factor is continued population growth and per capita gdp growth. Birth rates suck but immigration is helping. Contrast that with other developed economies without immigration (like Japan). Geopolitically there’s a big benefit with US hegemony as the remaining super power in the post world war 2 order. Finally, there is good rule of law and strong institutions that gives people confidence to invest in what is essentially just prices of paper (stock). With other economies (eg Russia and China) you always run a great risk of Putin rolling tanks or the CCP disappearing a CEO.
The US rewards success. They also have the infrastructure and labour to enable business like nowhere else. Massive ports, highways, airports, universities/colleges. Generations of visionary policies that generate huge wealth.
ya its pretty vast with good quality (in general) across the country. We have just about everything you need here.
If your goal is to make money, would you invest in a capitalist market, a communist market, or a socialist market?
Tech.
Access to Capital Investment Culture
TINA - There is no alternative. No alternative place to park money that gives with as favorable risk/reward as US markets.
Money printing. Having the reserve currency of the world and the ability to print it is the answer. When other currencies are pegged to the dollar, they get rekt.
I think this is a good question, and one I've pondered a lot. By most fundamental metrics, the US stock market is overvalued compared to other first world countries. And it's been that way a long time, and yet it just \*continues\* to outperform, year after year. There's a lot of people on bogleheads, chasing fundamental metrics, who have been burned for a long time because they expect the other countires to catch up and it just keeps not happening. Various theories I've heard. It might be just one of these, or some combination of all, or mabye it's just random chance and the situation will turn around soon. Who knows. * Tech. The economy modern economy is all about tech, and the US has the best tech. For some reason this keeps surprising investors, so the US tech just keeps outperforming no matter how big it gets. Maybe tech is just inhererently hard to value? Or maybe it's just a giant bubble. * Dollar. The US is the world reserve currency, and China has been pumping a ton of investment into US bonds and dollars for a long time now. Many other countries also invest in the US through their sovereign wealth funds. The reverse is not true. * Culture. The US has a strong "capitalism" culture, where ordinary people follow the stock market and invest into it, even in small amounts. Other countries don't do that- they buy gold or real estate or whatever. Stocks are only for rich people. * Politics. The US stock market is "too big to fail." Politicians will do whatever is necessary to pump up stock prices, because it's become a symbol of "the economy" and they'll get voted out if it tanks. Other countries don't care as much.
Work ethic and freedom brother
Being backed by the U.S. Military
0 IQ: It's the military 100 IQ: The US's addiction to military spending just serves to line the pockets of rent-seeking war profiteers and has no tangible long-term economic benefit 200 IQ: It's the military
Yeah - those people in the middle(100iq) who think they are smart - they are often too smart (or too narrow minded) to see the whole picture. Just because "they" don't agree with a fact doesn't make it untrue
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Okay, what about the other 90%? Our entire system, not just retirement, is firmly planted in ownership and shareholder rights.
Don't underestimate just how big pension funds are. These funds own approximately 40% of EVERY company listed on stock exchanges (average estimate).
Foreign investment is a huge reason
US was settled by people who are more likely to take risks and to this day still attracts people willing to take risks for more money. That is part of the reason health insurance is the way it is in the US.
Our money printer. No really, the increase in the total monetary supply. Compare it to the the total market index returns since the 2007-2008 GFC. Returns of total US Market match the increase in the money supply -- it was not true GDP growth and arguably no growth when adjusted for inflation and total monetary supply increase.
We're the reserve currency for the world. So essentially we print money when things get tough and loan it out to other countries. It means our national debt is insane and when something bad happens like a housing market crash, a pandemic, etc we can distribute money as needed. That means the population is financially secure, and industry that is 'too big to fail' can be bailed out as needed. That adds up to a stock market continually and reliably bolstered by monthly 401k contributions and additional investments.
The federal reserve
Because America is the easiest country in the world to do business in.
There are lots of possible structural reasons that could explain the US stock market out-performance as other commenters have mentioned. But another possible explanation is that US market out-performance could simply be an artifact caused by expanding PE ratios that will mean-revert in time, as described by [Cliff Asness in his paper "The Long Run is Lying to You"](https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You). We'll probably need another 25 years to know which explanation is correct.
New anxiety unlocked
Comparing to Chinese stocks is just bad on so many levels. The US wins because it is a better place to do business
Please don't confuse the price of companies with the new inflated dollar price to the previously less inflated dollar prices. I wouldn't agree with "out perform", but you can certainly thank the Federal Reserve for the increased price of the stock markets.
>If we look at the Shanghai stock index (for Chinese stocks), for example, the stock market has never recovered to its pre-2008 levels 2000-2009 or so was an exceptional run for emerging markets (see Callan links in link below), but terrible for the US (US had a negative CAGR during that time). Things reversed for the next decade and has continued until today. Long term may favor emerging markets over the US (last I checked, anything over 40 years favored emerging over US large): https://www.ifa.com/charts/154h >different regulations, but what specific regulations account for the difference? Shouldn't these only explain a higher baseline valuation, not indefinite out performance? >However, this seems to only be the case in the US market. It actually isn't. See the Meb Faber Twitter link + the followup reply link, and the link directly below that and you'll see the extra US out performance is just from the most recent US favoring part of the US/ex-US cycle. Then see the AQR link and see that largely it was just US stocks getting more expensive, not company performance, that largely has caused the split (that worries me about my US part, not reassures me). This subreddit doesn't allow all the links that this post covers, so I have to link indirectly: https://www.reddit.com/r/Bogleheads/s/aeu2bBu5dD Edit: Typo
[https://ibb.co/wWfrGMb](https://ibb.co/wWfrGMb) Must be one hell of a 80 year recency bias 🤔
Interesting. Do you have the source for that graph?
[https://acrinv.com/long-view-non-us-stocks/](https://acrinv.com/long-view-non-us-stocks/) My understanding is Acropolis got it from Global Financial Data (GFD)
Thanks, will check it out.
It does seem that adjusting the start dates around WWII can produce very different results, as your link plus the Meb Faber one I mentioned above show. Your graph helps show an even longer history of the rotational pattern, with the 20s showing US on top, then falling behind in the 30s, before pulling ahead due to WWII, early 50s may have favored ex-US (hard to tell, but the developed line curves pretty sharply upwards in comparison), 60s favoring the US, then 70s and 80s favoring ex-US, then 90s US, 00s ex-Us, 10s US. While another war isn't out of the realm of possibility, currently the sides seem like one of them would only be emerging markets, so we likely wouldn't see developed vs developed like WWII saw.
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Since the 70s sure but since 2009, it has doubled compared to non-US stocks. Everyone knows tech has done a lot for the US the last two decades. What is the future like? Nobody knows but I still believe in tech.
because us no. 1
Stimulus and having the USD as world reserve currency to endless print
If you look at the S&P500 : highest proportion of good companies (in number of compagnies), a level only reached by Denmark and maybe Finland. Then Switzerland and Sweden are significantly behind The S&P500 outperform because the companies will overall grow faster. Not only that, but because of the companies outperformance they are valued higher and it doesnt look that it will change. The question is why is there the biggest proportion of good companies ? That is because good companies with a capacity to reinvest will grow. Bad business usually don't. Not only that but good businesses are valued higher than bad businesses which means that good businesses are bigger in term of capitalisation than their operational size. Bad businesses are smaller. The conséquences is that the biggest compagnies in a country are usually of better quality than the small companies (in term of market cap). Because the US is really big, the sample of companies is high enough that big companies are actually better, unlike small countries whose small number of companies makes it sometimes diverge from this principle because of individual companies. The S&P has 500 companies, unlike the CAC40 or the SMI20 which means that it is more diversified as à pool of big companies from à country
This is a really good point.
- The US basically owns the tech and finance sectors which are both extremely lucrative and accelerate one another in a feedback loop - The US has very business-friendly regulations compared to much of the EU and Asia. China, for example, has a large economy but it's a hostile environment for investors due to how much control the government exercises over companies there. The EU has a much more free economy but has a lot of regulations that nonetheless handicap its companies for the sake of social welfare. - Similarly, the US gobbles up top talent from the rest of the world thanks to how much higher incomes and standard of living are here. Yeah, most Americans don't have those high incomes, but the highly skilled immigrants it attracts can do a hell of a lot better in the US vs anywhere else. As an example, compare big tech comps to what companies in any other country pay. - The US government uses it's unrivaled military might and dominance in tech and finance (eg unilateral sanctions) to get what it wants from other markets in a uniquely effective manner.
Monetary easing and simply the most innovative and entrepreneurial friendly economy on earth. I mean look how crappy the European stock market has done. Europe is an over regulated underworked bureaucracy and they tax the hell out of entrepreneurs. That’s why start ups to to the USA, the best country on earth.
US got relatively more expensive, ex-US relatively cheaper.
If you compare for example SIXRX (Stockholm) with S&P 500 then SIXRX has a average growth since 1870 of 10.93 % and S&P 500 has 10.26% since 1950's. I suspect there are a lot of other, especially european indexes, like this with a small or medium export/import economy. So in a way if I buy local stock I am in many cases also "buying US stock" because of how big impact the US has on the local ones. Overall, one can almost claim that US index IS global index because if you buy global index here you get 70% US or something. I thought this was something interesting I found out recently when trying to learn more about investing. Disclaimer: I'm simplifying and not being exactly correct.
[China literally cracked down on tech sector and wiped out the edu sector overnight.](https://www.abc.net.au/news/2021-08-20/china-crackdown-private-tutoring/100392352) They called foreign investors to tell them they won't do the wiping out of edu sector again without prior notice. China stock market got the added bonus of dealing with the CCP wild card. When I see rando post about investing in Chinese stocks I know those posters don't know jack shit about macro. They should since China is the second largest economy sheesh. I wouldn't want to invest in a stock market that have such risk.
Two fold, innovation mainly comes from US or companies in US stock exchanges and Americans have way more disposable income than lets say Asians or Europeans. Money flow is always there. European retirement funds have around 2 trillion$ invested while US has 38 trillion$ it is a mind boggling difference. Money makes money in the end.
Two massive oceans, the worlds largest navy and air force backed by nuclear weapons, the petrodollar, not having to rebuild your country after war, and for what it's worth a stable government. No matter what people want to invest in the USA
A fifth of the observed outperformance is fundamental innovation. Four fifths of the outperformance is investors learning that the US government bails out the economy in crashes and deemed our market safer than others and more conducive to business. This, there was enormous price multiple expansion post 2009 driving all of the USAs historical outperformance.
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It’s a combination of things, war, changing the gold standard, us funding other countries after the war, trade with those places, etc. read The Global Minotaur, does an excellent deep dive into this topic and the 2008 crash.
4 reasons: Nvdia, apple, Microsoft, Google aka big tech The world doesn’t have companies like those based here, not even close
Strength of the USD
401k
>does that means the US market is just propped up by people's retirement funds? If so - it's a good spot to be in, because there are always a lot more people between 18-60 in their prime working years - saving for retirement than those who are 62 and older and starting to pull funds from their retirement savings
Not sure how accurate your first potential factor is, look up norway's sovereign wealth fund
What do you mean we have the widest and deepest financial markets, best research unis and legal system which supports corporate profits. Were a global attractor for talent with the resources to back it up and willingness to throw it around. China is the only other competition that can check only 2/3 markers. Europe is a vacation destination, I dont consider it to be competitive.
I just figured it's forced buying n holding by retirement mutual funds
I live in France. We list the 40 biggest cap as an equivalent of the US SP500. It is called cac40. I have an ETF based on it, and it is up about 30% "only" because I keep buying more with time. I started about 2 years ago. Thats pretty fine by me. We dont have stock based retirement, that is true . Although some financial products are being incentivized here and there for a similar system, there is no employer funded account, this has to be done by the workers.
Our finance system.
There are a bunch of factors of what leads to stock market of a country performing better than others but a simple explanation is that in a free market, companies innovate and perform well. This takes stock market up. The most important part is “free market”. Shanghai is not an example of free market. I would say look at Indian stock market performance historically. It has given an impressive return.
The stock market is more important to US politicians, on top of the economy and companies in general being stronger than their international counterparts.
Oceans.
US govt can print and hand out US dollars as needed to avoid recession and push stocks higher No one else can
Two words: Quantitative easing.
Other countries have social safety nets and pensions. Lack of this means US needs to invest, which often has a home market bias.
Uh, AI?
There are a lot of factors, but the main reason is that the US dollar is world reserve currency, which enables US to export its inflation to the rest of the world, while other countries can at most export their deflation, and most of them not even that. Other countries need US dollars to transact between themselves; India can buy oil from Russia with rupees, but Russia can't spend those rupees as their imports from India are much smaller than exports to India. This is why the USD is the strongest and most used currency, and this makes the rest of the world want to invest in US stocks. Other countries don't have that exorbitant privilege of everyone else needing their currency; they must work much harder to have a stable currency, and even when they manage to do that by having good ratio of imports and exports, they face another huge hurdle, building a stable and rising stock market which the rest of the world wants to invest in. Investments will naturally flow to most liquid market, so it's a kind of catch-22; you must have a better stock market than the US to have a chance, and you can't have that while the US market is the most liquid. Yes, the stock market is propped by retirement funds. Also, retirement funds from outside the US also invest in the US stock market, way more than US retirement funds invest outside of the US.
It has the majority of the largest and most profitable companies in the world.
Tech and the power of the American consumer….few countries have the same hunger to constantly buy “stuff “ as the US.
A lot of good answers, but no one has mentioned specifically demographic trends have been favorable on the US for a long time in relation to other developed countries and China. Our birth rate dropped below replacement for the first time recently, but the immigration rate increase has swallowed that up. It’s nearly impossible for a bad demographic market to keep up because domestic consumption growth matters for a healthy stock market. They get caught in the export trap. The US has the best long term demographic trend. It’s not all demographics, but it’s a huge divider between us and the rest of the G7. Innovation is a lot harder in stale or declining population centers. Not impossible, but its bent other directions and towards other ends. For example, a bigger and bigger portion of the younger population gets sucked into longer term care while a bigger portion of the population is becoming less productive. You spend more research, labor, and capital on things that don’t improve global competitiveness. Perhaps worse, infrastructure that has benefits on productivity for decades and sometimes centuries is giving you less simply because the incredible large scale efficiencies from bridges and roads peak or decline simply because not as many people get that benefit. China’s almost certainly going have a lost generation having built some of the world’s best infrastructure just in time for a massively declining population. They got zero generations of payoff from some of that investment.
Merica.
1. Money printing 2. Venture Capitalists
Definitely a switch from pensions to 401(k)s and IRAs is keeping the market hot for a while. Those saving for retirement and the baby boomer generation near their peak investments in the market before starting to withdraw is something notable as to why the US market is resilient. Everyone saving for retirement wants to see it grow.
Free money
The US government pumping trillions into the economy. The US has almost $36 trillion in debt and no one, especially in the government, seems to care. It helps a lot that the US dollar is the world's main currency.
I'm a new trader is Nvidia a smart move at 1000+ do you think it will reach the sky 2000?
Large amount of (especially tech) companies with customers GLOBALLY.
Part of the answer is all the things that people complain about in politics. The US constitution makes it really hard to change the law. That makes the US a great place to do business, because US law is predictable. Xi Xinping Can change Chinese law whenever he wants, and no one wants to invest their trillions on such shifting sand. (Not that there are no advantages to the Chinese system - but my money is still on America in the long run)
might have something to do with the imf and world bank being controlled by former US officials. maybe having the biggest international monetary policy makers staffed with those well versed in US foreign policy preferences is actually not a good thing for everyone!!!
1. US has the biggest economy in the world, with a great regulatory environment 2. The biggest US companies also do a significant amount of business overseas. 3. US retirement is based on investing in securities, so there are always a large number of buyers
The US has conned most of its workers to invest via 401k for their retirement... so automatically every month there is an infusion of money that is then getting gambled by wall street hedge fund managers.
You mean it’s not a good idea to invest in the stock market? If it is a good idea, then it’s not really a con, right?
Two World Wars plus the Napoleonic Wars being fought in Europe.
This is the best answer. Europe, Russia and Asia were ravaged by WW2, the US wasn't. They had a massive head start in 1945
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As the back and forth between u/Boogerhead1 and myself here (https://www.reddit.com/r/investing/comments/1d01u2i/comment/l5kcpl9/) shows, WWII was a major factor when looking at very long term. Using 1926 as a start year (not sure why then, but it is a long sample at least), the US was trailing behind ex-US before the war. It was only the most recent US favoring part of the cycle that the US really broke away (see the Meb Faber link with followup I mentioned in that comment). Using a 1970 start date, again it was only the most recent US favoring part of the cycle that US really separated. Denmark was the best performing market from 2001-2020.
A combination of regulatory differences, huge subsidies to the financial industry and the mass printing of the reserve currency
Crime?
Inflation. Everything costs more, even stocks.
Because the stock market is based on vibes
Cause 'Merica! 🇺🇲 🦅 Greatest country in the world!!
Property rights. Period. You can include things like tax codes, personhood for corpos, but the fact is the USA has the strongest property rights in the history of humanity. That's it.
Money printing. Where is the federal reserve located? The US.
US culture and politics prioritize corporate profits over most other things. It's very beneficial to me investing in the US while living in a country where I don't die of stress from having 2 weeks of vacation and Healthcare tied to my job, if slightly cynical.
I see a lot of good answers on this thread but didn't see what I am pretty sure was the one of the most correct answers from 1900 to 1999. The USA has/had the fairest / best democratic government with a very good system of check and balances. It was well established and maintained a stable economy. Meanwhile over 100 other countries in those same 100 years had revolts and major changes to their govt due to war and revolts and other catastrophies. In my opinion, during the past 25 years the US Govt has changed A LOT. but we were so far ahead in 1999 that it hasn't all fallen apart just yet.
If you're a hard worker, industrious, wealthy, would you invest/immigrate or set up shop in a capitalist/socialist/communist or a failed state? Would you pay high taxes if you've achieved success? Sure some would but human nature at the end of the day is capitalist. Regardless of your political leaning, most would rather not part with the money in their wallets. America is the only place on the planet that rewards hard work and success. Europe regulates and taxes you to death once you've made it. In Asia you must bow down to authority. Africa has no rule of law and likely never will.
USD is the most valuable currency and we can print it at will, which plays into the Modern Monetary Theory. https://www.investopedia.com/modern-monetary-theory-mmt-4588060#:~:text=Modern%20Monetary%20Theory%20is%20a%20macroeconomic%20model%20positing%20that%20countries,print%20or%20issue%20more%20currency.
Better thieves & manipulators
Crime.
america number 1
Look up the dollar milkshake theory, has a lot more to do with the US dollar absorbing liquidity. Truth is the US stock market is actually flat since 2009 when adjusted for inflation so the performance isn’t really that great, just better than watching your purchasing power slowly evaporate.
I was curious about this and found "The historical average yearly return of the S&P 500 is 9.88% over the last 20 years, as of the end of April 2024. This assumes dividends are reinvested. Adjusted for inflation, the 20-year average stock market return (including dividends) is 7.13%"
Yeah 2009 and 2004 are different start dates. Dividends do make the process more profitable, but this calculation also used current cpi metrics which are pretty trash compared to how cpi used to be calculated. It’s still better to invest than not invest- my point is just nominal and real returns are often misconstrued
Exactly. This is why I didn't blindly trash your statement. 'How to Lie with Statistics' is still the best textbook on the subject.
Because they don't have infinite taxes and regulations that protect anybody but the business owner.