4 months ago • 2 mins
US stocks have been rocking the charts these past ten years, thanks to a killer combo of strong domestic growth and the whole tech frenzy. And, though you might have reasonable worries about whether that outperformance can continue, there are a few reasons why US stocks might still be able to keep their superstar status.
First off, no market benefits more from AI than the US – it’s got the planet’s biggest tech industry and is the center of the technology’s developments. Labor markets are tight across most of the world (yes, even China) and AI can significantly boost productivity and lower costs. In simple terms, it can really rev up the profitability of US companies.
Second, for US stocks to do well, they need domestic growth to be strong. And that’s a tall order right now for most of the world’s economies. The International Monetary Fund (IMF) has shaved its rolling five-year forward projection of global GDP growth by nearly 35% over the past decade, mostly because of slowing population growth. Without more physical hands on deck to drive economic output, AI-driven productivity gains are likely the most material engine of growth. And the US is particularly well positioned on this front: analysts at Goldman Sachs estimate that AI could jack up US productivity by 1.5% annually, translating into an extra 1.1% in economic growth every year for a decade.
And third, with the risk of a global growth slowdown, it makes sense to load up on companies with more defensive and structural growth drivers. Compared to its peers, the US stock market has less exposure to recession-vulnerable industrials and basic material firms, and a heavy exposure to technology companies, which tend to hold up better in tough times.
Now, that’s not to say you should go all-in on US stocks. After all, there are other up-and-coming superstars like India that you mightn’t want to miss out on. But, with AI poised to transform industries and economies, you’re not going to want to give up on US stocks anytime soon.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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