Peak American Exceptionalism?

Expand Your Horizons with International Equities and Multiple Asset Classes

US equities have traditionally been the only game in town. Unless it was timed to perfection, looking at alternatives to domestic stocks has usually turned out poorly. However, with apologies to Bob Dylan, “The Times May Be A-Changin” as we may be witnessing peak American Exceptionalism, a topic previously explored in our weekly Three Pointers.

Peak American Exceptionalism means we may have seen the climax of global capital moving into the U.S. and, in particular, to our pre-eminent mega cap tech companies. The percentage of global equity market capitalization represented by the U.S. is now two-thirds according to MSCI, an extreme relative to the U.S. representing only one-fourth of global GDP.

Forecasting massive changes in global capital flows is difficult, but there are some signs of excess. As such, it is wise to examine alternatives to heavily weighting U.S. stocks in client portfolios.

Try Pave Pro

One reasonable alternative is to look at Pave’s Multi-Asset Class portfolio. Pave’s software monitors almost 100 global markets across all maturities of fixed income, equity markets across continents, energy, precious metals, currencies, and, yes, bitcoin. However, this portfolio does not exclude being involved in US equity and fixed income.

For example, as of December, money center and regional U.S. Banks are scoring high in our models and, therefore, these industries have a significant allocation in client portfolios along with Emerging Markets ex-China. Additionally, Pave clients have held around a 3% allocation in Bitcoin this year, depending on client preferences. Our model rankings are inputs into the same optimization model that has driven Pave Pro’s outstanding performance with individual U.S. equities. 

The choice to use this Multi-Asset Class portfolio either across your entire portfolio or just a portion gives you a more robust, more diversified investment stance in case: 

• The U.S. dollar falls, which will contribute to Emerging Market Equity outperformance
• Our economy enters into a recession, which will see benefits from being long fixed income instruments
• Inflation rises, which will benefit commodities

As you make plans with your clients for 2025, the multi-asset class alternative is a prudent discussion point. 

To learn more, please reach out by emailing sales@pavefinance.com or pressing the button below. We look forward to speaking with you.

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1. Testimonial provided by Josh Allen in April of 2024. Josh is a current client of Pave Finance, Inc. No compensation was provided in exchange for this testimonial.

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