Dividends and Outsized US share of world equity may fall

We all have biases and that is fine, but there are some that as an investor you do not think about too often. The bias is we have is linked to shop local. Whatever you location is, you will tend to shop in the vicinity because it is convenient, and it makes reasonable sense to do so. After you determine where you live, you tend to figure out the logistics to make it work and ideally it is best place for you. There are reasons why you live where you live. In the investing world, the biggest stock market in the US is the New York Stock Exchange or the Nasdaq. There are other stock markets, but as an investor you want to own shares in New York. As you become a seasoned investor, you may look to other stock exchanges such as in Chicago, Philadelphia and Boston, but the bias is towards New York.

In an article by Jamie McGeever of Reuters, the US slice of the multitrillion dollar global equity market is 41% total share. According to figures from the World Federation of Exchanges (WFE), US equity market cap accounted for 41% of the world total just below the previous year of 42%. Since 2000, the US market has averaged 38.3%.

According to Raina Oberoi, global head of equity solutions research at MSCI, the market cap proportions and valuations alone do not signal bubbles, but they can be warning signs.

WFE data showed global market cap end at $100 trillion down from a peak of $125 trillion a year earlier.

Mark Haefele, global wealth management chief investment officer at UBS, believes US stocks are 40% more expensive than European and emerging market stocks. The S&P 500 index is trading at 17.7 times earnings while the MSCI Europe is trading at 12.5 times earnings.

Linking to dividend paying stocks, if you are buying for the dividend and expect to hold a medium to long term, then it does not matter whether the stock is overvalued or undervalued when you buy. It is wonderful when you buy a stock and it moves and stays in positive territory in a short period of time, but stocks go up and down. There are always opportunities somewhere, but that does not mean you need to chase every opportunity. It is okay to have biases, just understand what they are and what that can limit you. The reality is every stock exchange performs the same manner, however, is it easy and convenient for you to follow the markets. We all have biases and that is not necessary a bad thing, do you know yours in regards to investing?

There are more questions than answers, till the next time – to raising questions.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s