Investors love the US, and with good reason. Wall Street has made them rich over the last dozen years. The big question now is whether it can continue to do so.
While China, Europe and emerging markets have struggled since the financial crisis, the US stock market has stood tall and now dominates to an almost unprecedented degree.
In 2008, US shares made up a relatively modest 40 per cent of total stock market capitalisation. Today, they are up to 60 per cent. This is particularly impressive given that the US only makes up 25 per cent of global gross domestic product. Wall Street punches well above its weight. No wonder investors love it.
The result is that many will have far more exposure to the country's fortunes than they realise. If the US stumbles, we're all heading for a fall.
No prizes for guessing why the US has beaten the world. It’s mostly thanks to the Magnificent Seven tech mega-caps – Amazon, Apple, Google-parent Alphabet, Meta Platforms, Microsoft, Nvidia and Tesla.
Today, they make up about 36 per cent of total S&P500 market capitalisation and rising. In the first half of this year, they generated 49 per cent of the S&P 500’s total gains. The remaining 493 stocks on the index just can’t keep up.
Yet many analysts now fear the hype over artificial intelligence could backfire, amid dangerously inflated share values. Warren Buffett’s recent decision to sell half his stake in Apple at the start of August crystallised fears.
In recent days, anxieties have focused on the biggest AI beneficiary of all, chip maker Nvidia. Its shares are up an incredible 2,570 per cent over five years, and 147 per cent so far this year.
Yet its runaway success has made investors jumpy, as we saw when it published its second quarter results on August 29.
Nvidia’s second quarter revenue hit a high of $30 billion, up 15 per cent from the previous quarter and 122 per cent from a year ago. In response, the shares fell 6 per cent.
On September 3, shares of Nvidia tumbled nearly 10 per cent.
The Nvidia board forecasts that third-quarter revenue will climb again to $32.5 billion, but that only marks an 80 per cent increase on last year.
William Marsters, senior sales trader at Saxo UK, said “the market reaction highlights how investors have become too accustomed to exceptional results” from US tech in general and Nvidia in particular.
The slightest wobble from Nvidia is enough to send shock waves through the rest of the market. A US recession could trigger an earthquake.
Thanks to the rise of index-tracking exchange-traded funds, the world has built a significant stake in US fortunes, says Jason Hollands, managing director of fund platform Bestinvest by Evelyn Partners.
An investor holding the Vanguard FTSE All-World UCITS ETF is putting 59.44 per cent of their money in the US. Possibly without realising it.
Second-placed Japan makes up just 6.02 per cent of the trust, with the UK in third place at 3.38 per cent.
That's an incredible level of concentration, and it gets worse.
Apple makes up 4.2 per cent of the entire trust, followed by Microsoft (4.05 per cent), Nvidia (3.62 per cent). Amazon, Meta and Alphabet aren’t far behind. In total, the Magnificent Seven make up more than 17 per cent of the entire ETF.
The world now has outsized exposure to the fortunes of one country and a handful of companies.
“Were the US to hit the buffers, it would have a massive negative damage on the world’s investment portfolios,” Mr Hollands warns.
That's a real worry as the US Federal Reserve battles to avert an economic hard landing, with the first-rate cut now expected in September.
Mr Hollands remains hopeful but warns that even if the US does avoid recession, the country’s equities look expensive today. “If AI doesn't boost profits and productivity as expected, tech could take a beating.”
The US also faces a divisive presidential election in November. The stakes couldn't be higher as Democratic candidate Kamala Harris takes on Republican rival Donald Trump.
Both have policies that could strike fear into markets, Mr Hollands says, with Ms Harris recently mooting price controls, while Mr Trump threatens trade wars.
There is little to suggest that either party will try to rein in the US deficit, even as the country's debt races past $35 trillion, Mr Hollands says. “Big Tech could also take a hit, with calls from both sides to tighten regulatory controls to curb corporate power.”
The US stock market is at a crossroads, with the economy “resilient yet uncertain”, says Tony Hallside, chief executive of Dubai-based brokers STP Partners.
“It remains a pivotal force in global markets, but economic and policy uncertainties could drive a shift to other regions, particularly Europe, with its more attractive valuations.”
Some regions are more exposed to the US than others, notably in GCC countries whose currencies are pegged to the dollar.
“Shifts in US economic policy, interest rate adjustments, or changes in monetary strategy can have an immediate and significant impact,” Mr Hallside says.
Nervous investors might want to rebalance towards more defensive stocks or even increase their cash holdings. “This could provide a cushion and allow investors to capitalise on any downturn by making strategic stock purchases.”
Mr Hallside advises against exiting the market, though. “Investors must be prepared to weather short-term economic cycles,” he says.
Growing numbers will be tempted to seek refuge in gold, which could benefit whoever wins the election, says Marc Pussard, head of risk at APM Capital. “A Democratic win might lead to increased fiscal spending on social programmes and infrastructure. This could raise concerns about inflation, prompting investors to buy gold as a hedge, driving up its price.”
Mr Trump may be good for gold, too. “His previous tenure was marked by political upheaval both domestically and abroad. A repeat would make gold look more attractive as a safe-haven asset,” Mr Pussard says.
Few people will want to dump the US from their portfolios, but it's still worth checking your exposure.
Yet nervous investors have to ask themselves another question. If not the US, then where? Today, no country even comes close to matching its growth potential.
How Alia's experiment will help humans get to Mars
Alia’s winning experiment examined how genes might change under the stresses caused by being in space, such as cosmic radiation and microgravity.
Her samples were placed in a machine on board the International Space Station. called a miniPCR thermal cycler, which can copy DNA multiple times.
After the samples were examined on return to Earth, scientists were able to successfully detect changes caused by being in space in the way DNA transmits instructions through proteins and other molecules in living organisms.
Although Alia’s samples were taken from nematode worms, the results have much bigger long term applications, especially for human space flight and long term missions, such as to Mars.
It also means that the first DNA experiments using human genomes can now be carried out on the ISS.
Zayed Sustainability Prize
More from Neighbourhood Watch:
Know your Camel lingo
The bairaq is a competition for the best herd of 50 camels, named for the banner its winner takes home
Namoos - a word of congratulations reserved for falconry competitions, camel races and camel pageants. It best translates as 'the pride of victory' - and for competitors, it is priceless
Asayel camels - sleek, short-haired hound-like racers
Majahim - chocolate-brown camels that can grow to weigh two tonnes. They were only valued for milk until camel pageantry took off in the 1990s
Millions Street - the thoroughfare where camels are led and where white 4x4s throng throughout the festival
RESULTS
Lightweight (female)
Sara El Bakkali bt Anisha Kadka
Bantamweight
Mohammed Adil Al Debi bt Moaz Abdelgawad
Welterweight
Amir Boureslan bt Mahmoud Zanouny
Featherweight
Mohammed Al Katheeri bt Abrorbek Madaminbekov
Super featherweight
Ibrahem Bilal bt Emad Arafa
Middleweight
Ahmed Abdolaziz bt Imad Essassi
Bantamweight (female)
Ilham Bourakkadi bt Milena Martinou
Welterweight
Mohamed Mardi bt Noureddine El Agouti
Middleweight
Nabil Ouach bt Ymad Atrous
Welterweight
Nouredine Samir bt Marlon Ribeiro
Super welterweight
Brad Stanton bt Mohamed El Boukhari
IF YOU GO
The flights: FlyDubai offers direct flights to Catania Airport from Dubai International Terminal 2 daily with return fares starting from Dh1,895.
The details: Access to the 2,900-metre elevation point at Mount Etna by cable car and 4x4 transport vehicle cost around €57.50 (Dh248) per adult. Entry into Teatro Greco costs €10 (Dh43). For more go to www.visitsicily.info
Where to stay: Hilton Giardini Naxos offers beachfront access and accessible to Taormina and Mount Etna. Rooms start from around €130 (Dh561) per night, including taxes.
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
More from Neighbourhood Watch:
Mountain%20Boy
%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Zainab%20Shaheen%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%3C%2Fstrong%3E%20Naser%20Al%20Messabi%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3C%2Fstrong%3E%3A%203%2F5%3C%2Fp%3E%0A
More from Neighbourhood Watch:
UAE currency: the story behind the money in your pockets
More on animal trafficking
More on Quran memorisation:
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
UAE currency: the story behind the money in your pockets
Richard Jewell
Director: Clint Eastwood
Stars: Paul Walter Hauser, Sam Rockwell, Brandon Stanley
Two-and-a-half out of five stars
The Settlers
Director: Louis Theroux
Starring: Daniella Weiss, Ari Abramowitz
Rating: 5/5
The specs: Macan Turbo
Engine: Dual synchronous electric motors
Power: 639hp
Torque: 1,130Nm
Transmission: Single-speed automatic
Touring range: 591km
Price: From Dh412,500
On sale: Deliveries start in October
Six large-scale objects on show
- Concrete wall and windows from the now demolished Robin Hood Gardens housing estate in Poplar
- The 17th Century Agra Colonnade, from the bathhouse of the fort of Agra in India
- A stagecloth for The Ballet Russes that is 10m high – the largest Picasso in the world
- Frank Lloyd Wright’s 1930s Kaufmann Office
- A full-scale Frankfurt Kitchen designed by Margarete Schütte-Lihotzky, which transformed kitchen design in the 20th century
- Torrijos Palace dome
More on animal trafficking
Company%C2%A0profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3EHayvn%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2018%3Cbr%3E%3Cstrong%3EFounders%3A%20%3C%2Fstrong%3EChristopher%20Flinos%2C%20Ahmed%20Ismail%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EAbu%20Dhabi%2C%20UAE%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3Efinancial%3Cbr%3E%3Cstrong%3EInitial%20investment%3A%20%3C%2Fstrong%3Eundisclosed%3Cbr%3E%3Cstrong%3ESize%3A%3C%2Fstrong%3E%2044%20employees%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3Eseries%20B%20in%20the%20second%20half%20of%202023%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EHilbert%20Capital%2C%20Red%20Acre%20Ventures%3C%2Fp%3E%0A
Super heroes
Iron Man
Reduced risk of dementia
Alcohol consumption could be an issue
Hulk
Cardiac disease, stroke and dementia from high heart rate
Spider-Man
Agility reduces risk of falls
Increased risk of obesity and mental health issues
Black Panther
Vegetarian diet reduces obesity
Unknown risks of potion drinking
Black Widow
Childhood traumas increase risk of mental illnesses
Thor
He's a god
Dengue%20fever%20symptoms
%3Cp%3EHigh%20fever%20(40%C2%B0C%2F104%C2%B0F)%3Cbr%3ESevere%20headache%3Cbr%3EPain%20behind%20the%20eyes%3Cbr%3EMuscle%20and%20joint%20pains%3Cbr%3ENausea%3Cbr%3EVomiting%3Cbr%3ESwollen%20glands%3Cbr%3ERash%26nbsp%3B%3C%2Fp%3E%0A
Padmaavat
Director: Sanjay Leela Bhansali
Starring: Ranveer Singh, Deepika Padukone, Shahid Kapoor, Jim Sarbh
3.5/5
more from Janine di Giovanni
Indoor Cricket World Cup - Sept 16-20, Insportz, Dubai
Mohammed bin Zayed Majlis
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20myZoi%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202021%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Syed%20Ali%2C%20Christian%20Buchholz%2C%20Shanawaz%20Rouf%2C%20Arsalan%20Siddiqui%2C%20Nabid%20Hassan%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%3C%2Fstrong%3E%2037%3Cbr%3E%3Cstrong%3EInvestment%3A%3C%2Fstrong%3E%20Initial%20undisclosed%20funding%20from%20SC%20Ventures%3B%20second%20round%20of%20funding%20totalling%20%2414%20million%20from%20a%20consortium%20of%20SBI%2C%20a%20Japanese%20VC%20firm%2C%20and%20SC%20Venture%3C%2Fp%3E%0A
SPAIN SQUAD
Goalkeepers Simon (Athletic Bilbao), De Gea (Manchester United), Sanchez (Brighton)
Defenders Gaya (Valencia), Alba (Barcelona), P Torres (Villarreal), Laporte (Manchester City), Garcia (Manchester City), D Llorente (Leeds), Azpilicueta (Chelsea)
Midfielders Busquets (Barcelona), Rodri (Manchester City), Pedri (Barcelona), Thiago (Liverpool), Koke (Atletico Madrid), Ruiz (Napoli), M Llorente (Atletico Madrid)
Forwards: Olmo (RB Leipzig), Oyarzabal (Real Sociedad), Morata (Juventus), Moreno (Villarreal), F Torres (Manchester City), Traore (Wolves), Sarabia (PSG)
Killing of Qassem Suleimani
%3Cp%3E%3Ca%20href%3D%22https%3A%2F%2Fwww.thenationalnews.com%2Fbusiness%2Feconomy%2Fislamic-economy-consumer-spending-to-increase-45-to-3-2tn-by-2024-1.936583%22%20target%3D%22_self%22%3EGlobal%20Islamic%20economy%20to%20grow%203.1%25%20to%20touch%20%242.4%20trillion%20by%202024%3C%2Fa%3E%26nbsp%3B%3C%2Fp%3E%0A%3Cp%3E%3Ca%20href%3D%22https%3A%2F%2Fwww.thenationalnews.com%2Fbusiness%2Feconomy%2Fuk-economy-plunges-into-worst-ever-recession-after-record-20-4-contraction-1.1062560%22%20target%3D%22_self%22%3EUK%20economy%20plunges%20into%20worst-ever%20recession%20after%20record%2020.4%25%20contraction%3C%2Fa%3E%3C%2Fp%3E%0A%3Cp%3E%3Ca%20href%3D%22https%3A%2F%2Fwww.thenationalnews.com%2Fbusiness%2Feconomy%2Fislamic-economy-consumer-spending-to-increase-45-to-3-2tn-by-2024-1.936583%22%20target%3D%22_self%22%3EIslamic%20economy%20consumer%20spending%20to%20increase%2045%25%20to%20%243.2tn%20by%202024%3C%2Fa%3E%3C%2Fp%3E%0A
House-hunting
Top 10 locations for inquiries from US house hunters, according to Rightmove
- Edinburgh, Scotland
- Westminster, London
- Camden, London
- Glasgow, Scotland
- Islington, London
- Kensington and Chelsea, London
- Highlands, Scotland
- Argyll and Bute, Scotland
- Fife, Scotland
- Tower Hamlets, London
More on Quran memorisation:
More from Neighbourhood Watch
Abu Dhabi Sustainability Week
Zayed Sustainability Prize
Background: Chemical Weapons
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
More on animal trafficking
COMPANY%20PROFILE%20
%3Cp%3E%3Cstrong%3EName%3A%3C%2Fstrong%3E%20Haltia.ai%0D%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202023%0D%3Cbr%3E%3Cstrong%3ECo-founders%3A%3C%2Fstrong%3E%20Arto%20Bendiken%20and%20Talal%20Thabet%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%2C%20UAE%0D%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20AI%0D%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%2041%0D%3Cbr%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20About%20%241.7%20million%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Self%2C%20family%20and%20friends%26nbsp%3B%3C%2Fp%3E%0A
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
More from Rashmee Roshan Lall
Killing of Qassem Suleimani
KILLING OF QASSEM SULEIMANI
Killing of Qassem Suleimani
