Given that US stocks account for almost two-thirds of global equity indices, it takes huge conviction to go to underweight and risk performance below the benchmark, ipso facto losing assets when it comes to the year-end. Punch-drunk retail investors in America, having been rewarded in “buying the dip”, see little risk in continuing the party, despite several traditional equity market valuation matrices that have exceeded even the dot-com era.
Global markets finished the third quarter at or close to their all-time highs for 2025, at least on nominal index terms. Despite losing yet another prime minister, Japan’s Nikkei 225 is up 16%; the Hang Seng China Enterprises Index gained 31%, buoyed by news last week of Nvidia Corp and Alibaba Group Holding’s partnership, and even with the incursion of Russian drones over Nato soil, the Eurostoxx 50 managed a modest 12%.
As Donald Trump sent troops to Portland for “war” and the Department of Justice takes up his suggestion to prosecute former FBI director James Comey, US indices seem invincible in notching up a series of new highs after Jerome Powell cut interest rates in September. The S&P 500 is up 13% year to date, trailing Nasdaq’s 17%. Global institutional investors simply cannot ignore the one global stock market that has rewarded innovation richly with capital gains, but has also created regular bubbles — the latest fad being AI.
