Everyone knows US stocks trade at higher valuations than the rest of the world. The S&P 500 is historically expensive (Shiller PE near 40x). The usual argument is that the US deserves a "Trust Premium." We have the stable government, the reserve currency, and the predictable policy. You pay a luxury tax for US stocks because it's the safe haven.
But that trust is evaporating. We are watching the stability of the US erode in real time. With Trump's erratic behavior and policy by tweet, the "predictable" part of the US thesis is gone.
If the US acts like a volatile emerging market, it shouldn't trade at a safety premium. Why pay 20x or 25x earnings for slow growth US companies when the political risk is skyrocketing?
The real asymmetry is abroad.
– China: You have tech monopolies with actual growth trading at 8x or 9x earnings.
– Brazil/Europe: Massive discounts.
– US: You pay a huge premium for "safety" while the political landscape gets more irrational by the day.
The valuation gap is closing, and it will continue to close as long as we have the DUmp in the white house.
This is why I think looking for "value" in the US right now is a mistake. People keep asking if beaten down stocks like PYPL or ADBE are value plays. They aren't. US market will probably continue to be on a relative decline (which has been for the last year) as long as the current policies persists.
The US "Safety Premium" is dying. You are paying for stability that isn't there anymore.
byu/TraditionalMango58 instocks
Posted by TraditionalMango58
14 Comments
Is trump really the cause or he’s just there coincidentally? Is it causation or correlation?
Yes the market is on a decline. Wow can you get any dumber
Traded stocks based off shifting political winds does not work well.
US businesses still have a lot of technological advantages and “dynamism” over their competitors. I think what happened with Novo Nordisk is a great example. They invented the ozempic stuff, but their stock is down significantly recently. Eli Lily copied them, and is now seems to be outcompeting them.
Yeah I always wondered how alibaba was trading at a wonderful valuation until the ceo disappeared and the money off their balance sheet starting disappearing
Agreed and I’ve significantly increased my Canadian exposure this year. Also looking to add Gold and BTC to the mix.
No way I’m putting money into Countries like China where anything can be manipulated or taken at will. Brazil? lol
This fking shit again.
No, Trump wont kill US safety premium, not yet.
S&P is valued higher because of the absolute JUGGERNAUTS on that list.
Take this for example: Samsung nearly owns fking everything in South Korea, they are THE company there, they are almost on a near level as the government. But in the states? That level of economy is just one in a long ass chain of companies like Google.
Untill US actually descends into dictatorship or gets engulfed in a civil war, US will always have that safety premium.
You’ll know when the real trouble sets in when you starts hearing news like Mag7 are relocating their HQ / establishing alternative HQ.
How so? Stock market is at an all time high, Trump got many trade deals done, tamed inflation, got rate cuts, made China capitulate, and ended 8 wars.
Wasn’t the same thing said in April?
Yawn, this is just sensationalist bs. No one actually believes this, especially since Trump will be out eventually anyway. We keep hitting ATHs because the market knows Trump’s power and time are both limited.
Heresy. Crypto is totally worthless and sells for big bucks. The S&P is clearly undervalued. /s
The thing is, no matter the political environment or party in charge, the US is unique in that a lot of decision making power remains in the hands of the private sector. Also, our reserve currency status remains secure unless there’s a credible alternative. That the US market still commands a premium is a testament to that; otherwise it would have crashed a long time ago.
Lmao !remindme 1 year. This is a stick sub so I’m going to clown your dinner take and anyone who subscribes to it into infinity. My feed is ruined. Get help!