America at 250: is the US still the world’s most exciting market?

Martin Connaghan, Co-Manager of Murray International Trust, said: “It took the United States roughly half its 250 years to move from independence to becoming the world’s largest economy, overtaking the United Kingdom around the turn of the 20th century. This rise was underpinned by several structural advantages. Vast natural resources and fertile land supported both industrial and agricultural expansion, while rapid industrialisation and a strong culture of innovation drove sustained productivity gains. A growing population, combined with rising incomes, created a deep domestic market, allowing businesses to scale without heavy reliance on exports. Despite periods of internal conflict, the US developed relatively stable political and legal institutions, which supported investment and entrepreneurship. At key moments, particularly following major global conflicts, policymakers further cemented the country’s position through financial leadership, a strong currency, and an expanding global trade presence.

“Looking ahead, many of these structural strengths remain in place. The US continues to benefit from a large domestic market, global leadership in innovation and technology, and deep capital markets supported by strong institutions and the rule of law. Its reserve currency status and financial influence are likely to remain central pillars of global economic leadership, even as they are increasingly questioned in a more multipolar world characterised by trade fragmentation and regionalised supply chains.

“As Buffett himself has said in his 2020 letter to shareholders, never bet against America.”

Current US positioning: overweight or underweight?

Joe Dowling, Fund Manager of Invesco Global Equity Income Trust, said: “We are currently underweight the US relative to the global index. This has been a consistent feature of the strategy since we took over in 2020, but the size of that underweight has increased over time. This is not a top-down call. Our process is entirely bottom-up. Over the past few years, the US has increasingly dominated global benchmarks as a small number of very large companies have grown significantly. Our valuation driven approach has naturally led us elsewhere. More recently, this has included areas such as healthcare and other out of favour sectors where valuations have become more compelling.”

Samantha Fitzpatrick, Co-Manager of Murray International Trust, said: “Murray International currently has about 37% in US-listed companies. This is the largest it has ever been, but still considerably underweight relative to a global benchmark, such as the MSCI AC World, which has about 65% in the US. 

“The key risk for Murray International of having a neutral or overweight position in US equities, or more specifically holding positions in its biggest constituents, is that doing so would greatly impact income generation within the trust and therefore make it very difficult to fulfil the investment objective as set by shareholders. Compared to even ten years ago, there are now far more income opportunities within US equities. However, position sizing is influenced by the general level of income on offer in the US compared to other markets.”

Risks on the horizon

Joe Dowling, Fund Manager of Invesco Global Equity Income Trust, said: “While the US index might appear diversified on the surface, large parts of it are driven by the AI capex boom. If this boom slows, that risks a significant headwind to both earnings and multiples. That combination can be extremely painful. We’d extend this risk to include large parts of emerging markets and Japan. At a time when valuations, expectations and momentum are extended, it is even more important to ensure portfolios are diversified by their driver of return, rather than concentrated into a single theme.”

Martin Connaghan, Co-Manager of Murray International Trust, said: “The domestic backdrop is becoming more complex. While not unstable, the US is more politically polarised than in recent decades, with widening divisions and reduced scope for bipartisan policymaking. Demographically, population growth has slowed materially and is increasingly reliant on immigration, with low fertility contributing to a gradually ageing profile. Although this compares favourably with other developed markets, it remains weaker than the demographic momentum seen in many emerging economies.

“At the same time, the US retains one of the highest income levels globally, supported by strong productivity and innovation; however, growth in income per capita is more moderate and no longer leading, particularly relative to faster-growing emerging markets. This places greater emphasis on productivity and capital investment as the primary drivers of future expansion. Against this backdrop, the level of government debt has risen significantly relative to the country’s own history. While this is not unusual among developed economies, it does represent a potential constraint over time, particularly when combined with an ageing population and rising fiscal pressures. Taken together, this points to an economy with enduring structural strengths, but one that may face a more complex path ahead, with greater reliance on policy discipline, productivity gains, and sustained investment to support long-term growth.”

Attractive opportunities in the US 

Malcolm MacColl, Manager of Monks Investment Trust, said: “While the market has focused on the vast sums being spent to build AI infrastructure in the US, we are increasingly finding our best opportunities beyond this important but narrow theme. Investors have used blunt judgements to label entire businesses as ‘AI losers’, and we think several have been misjudged.

“Samsara is one. It helps companies across utilities, logistics and construction manage their physical assets, and its shares have fallen sharply. We think that is wrong. Far from being disintermediated, its edge in integrated hardware, proprietary data and software should grow more valuable as it integrates AI into its offering. Samsara is one of many attractive opportunities we’re finding caught in the software sell-off despite excellent results.

“The opportunity is broadening in the physical world, too. Spending on electrification, reshoring, defence and energy infrastructure is creating real bottlenecks, and US companies exposed to scarce real assets are seeing renewed growth. They include Freeport-McMoRan in copper, EQT in natural gas and Tidewater in offshore services. Healthcare, meanwhile, has been all but forgotten: Medpace, Medline and Ensign are recent additions offering attractive, economically insensitive growth.

“The intensity of the market’s focus on AI has cast a long shadow. We think that shadow is where much of the value now lies.”

Samantha Fitzpatrick, Co-Manager of Murray International Trust, said: “We initiated two new US positions in May. The first was ONEOK, a leading US midstream operator focused on natural gas and natural gas liquids infrastructure with largely fee-based, volume-linked earnings. While the stock has performed well year-to-date, the position was funded by trimming global miner BHP (an even stronger performer), making the entry point more palatable. The switch reduces the trust’s direct commodity exposure after a strong run and provides income uplift given ONEOK’s 5% dividend yield. 

“The second initiation was Union Pacific, one of the highest quality rail operators in North America. A potential combination with Norfolk Southern could offer meaningful upside, but even standalone we view it as a strong business, reasonably valued, with a resilient, growing income stream.”

Can the US’s share of the global market just keep on growing? 

Martin Connaghan, Co-Manager of Murray International Trust, said: “The sustainability of the United States’ outsized share of global equity markets remains a subject of intense debate among global allocators, particularly given the growing divergence between its market capitalisation and its share of the real global economy. On one hand, this dominance is supported by structural strengths, including economic resilience, deep and liquid capital markets, and a powerful wave of AI-driven capital expenditure that continues to underpin earnings growth, especially within large-cap technology. The continued expansion of passive investing has reinforced this leadership.

“However, this same dynamic may also be contributing to distortions. The scale of passive flows can amplify concentration, reinforcing momentum in a narrow group of mega cap names and potentially weakening traditional price discovery. Combined with elevated valuations, this leaves markets more sensitive to earnings disappointments. Beneath the surface, elements of a more ‘K-shaped’ economy (where strong corporate performance diverges from softer underlying consumption) raise questions about the breadth and durability of growth. The US also remains reliant on foreign capital to support both its equity market and fiscal position, leaving it exposed to shifts in global investor preferences. 

“History provides a cautionary parallel – Japan once represented an outsized share of global equity markets at its peak before experiencing a prolonged period of decline. Taken together, while there are compelling reasons for continued US leadership, the interaction between concentration, valuation, structural imbalances, and the reinforcing effects of passive investing suggests that the current level of growth and scale of dominance may prove difficult to sustain indefinitely.”