For the past decade, global investors have had a clear favourite – the United States. Its dominance in technology, innovation and capital markets has been unrivalled. But as the tide of economic fortune shifts, it’s time to ask if US exceptionalism is coming to an end. And more importantly, what does that mean for Australian investors?
I think the Australian sharemarket is about to start a new chapter of relevance. We’ve spent years in the shadow of the size and shine of the US tech boom, but a combination of short-term tailwinds and long-term fundamentals could set us up for healthy returns for years to come. Let me explain why.
The US market has been carried by the so-called “magnificent seven” – a handful of mega-cap tech stocks such as Apple, Microsoft and Nvidia. They’re impressive businesses but the market has become very narrow, hanging on a single theme with lofty valuations and some growing macro headwinds to contend with.
In contrast, the Australian market has not experienced the same run-up. That’s partly because we do not have a large tech sector – technology comprises less than 5 per cent of the S&P/ASX 200 Index, compared to over 30 per cent of the S&P 500.
Instead, our market is dominated by banks and resources, which may not sound flashy, but in this environment, they offer reliability, yield and pricing power, making the Australian market a reliable workhorse for investors.
All information is current as at its published date unless otherwise stated.
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