The strong performance of the United States market will not last and investors should look at other developed markets that are starting to pull ahead, which may require them to diversify their portfolios more broadly, a global investment manager has stated.
American Century multi-asset strategies chief investment officer Richard Weiss said the recent bout of ‘US exceptionalism’, which considers that market as distinctive and outperforming other nations, would not last.
“If you look back in history, any economy or market that’s outperformed anywhere near the degree that we have in the US over the last five or 10 years, there’s never been an instance where that’s continued over the ensuing five or 10 years,” Weiss said in a recent online discussion.
“We are already seeing evidence of this and if you look at the MSCI EAFE Index of non-US developed market shares, it is more than triple the return to the S&P 500 this year. It’s far outperforming the US.”
As such, American Century global growth chief investment officer Patricia Ribeiro noted that in 2025 and beyond, investors should look elsewhere for opportunities.
“At this point, valuations are very attractive, but if you look at earnings growth and expectations for earnings growth, it’s coming from outside the US in both developed and emerging markets,” Ribeiro said.
“If you look at emerging markets, gross domestic product growth is strong and is actually higher than the US. We are seeing that consumer spending is still strong in emerging markets and will continue to be the case.”
Given this, Weiss added investors should diversify, but warned against chasing safe havens.
“There were many who, in light of what’s going on today, are on a flight to quality. They’re running to the proverbial safe havens of precious metals or defensively oriented stocks, and some are running to Bitcoin, which is jumping from the frying pan into the fire,” he said.
“Yet the opportunity cost of panicking and running to those so-called safe havens is too high. It’s better off to diversify again.
“We don’t know what’s going to happen. Your only safe play is to spread it out, so that means across sectors, asset classes, styles, size and geography.”
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