I don't see stocks in the US versus ex-US as an apples to apples comparison.
Whereas policy in the US is tilted toward maximizing returns to shareholders, other countries have other values, like system stability, equality, privacy, economic autonomy, etc. Chinese stocks, for example, are a completely different beast than US stocks because they exist in a country where corporations must serve the government's interests instead of vice versa. European IT firms exist within a regulatory paradigm that emphasizes the privacy of individuals, and therefore cannot do the sort of things Meta and TikTok and your bank do. These policy differences lead to big differences in returns to shareholders.
Also, there is no other country I'm aware of that has adopted consumerism and workaholism as its culture to the extent of the US. Americans work extremely hard to out-earn each other and to afford more plastic junk. People with disabilities, pregnant women, 70-year-olds - all must work or face homelessness or death from untreated medical conditions or exposure. The result is an economy that cycles through money very quickly, turning human lifespans into corporate profits with greater efficiency than anywhere else.
International may outperform from low levels as they become more like the US, but my money is on the system that compels people to start their 1 hour commutes at 5 a.m. and neglect their children so they can afford to buy 3 streaming services, a third-row SUV instead of a compact sedan, and an iPhone 14.
It's no way to live, but it's a great place to invest.
I agree with most of what you said but I think it’s changing super fast, and going from shareholder friendly super hardworking to slightly less hardworking and shareholder friendly could be devastating to US stocks if that happens (I’m not investing on this basis, just food for thought). I did investment banking early on out of school and it was a badge of honor to put in 80+ hour weeks to make 100k salary at 22 and now you have people at Goldman, the pinnacle of banks crying about work-life balance. Productivity is falling. Kids I’m mentoring in business school are asking me about how to find work life balance meaning a 45 hour work week for single 22-23 year old graduates, which is an absolute 180 from pre Covid times. Also people are having dogs instead of kids … it’s starting to feel like we are drifting towards a European lifestyle of short work weeks and pressured population growth. But who knows maybe a few more years past Covid Gen Z and younger millennials will fall back in line? Also the WTF level of handouts and debt forgiveness feels unsupportive of the hard work mentality.
Re shareholder friendliness, we seem to be a leader but the pendulum could be ready to swing there. Look at the popularity of ESG and possible ESG disclosure requirements coming, share buyback taxes for corporations, threats of windfall profit taxes etc. edit - grammar
There are a number of ways to kill the goose that lays the golden egg, and there are always people trying.
One method of change might be your concern about a cultural shift away from workaholism. However, I see American culture as fairly stable in that regard. Imagine how big this concern looked in the 1970s when there were literal hippies walking around, the smell of pot was everywhere, and unemployment was high. Well, actually the infamously workaholic 1980s and 1990s were right around the corner, cars and houses were getting fancier as the majority of people attempted to status signal, and women's entry into the workforce was about to drive societal economic efficiency beyond levels that were ever thought possible.
Another method to kill the goose would be if the US changed its form of government and became a one-party state like, say, Turkyie, Russia, Venezuela, El Salvador, Cuba, or Hungary. Single party or single person political domination almost never leads to good long-term shareholder returns because there are no checks and balances on corruption, because capital flees to more free places, because of brain drain, and a lot of other reasons. Sustaining one-party rule in the face of growing discontent requires creating a structure of corruption from the lowest police officer to the highest government officials, and this web of corrupted people protect the regime as a way of protecting their relative advantage in having access to illicit funds. Eventually this drains the economy and saps people's incentive to work.
There could still be a cultural shift toward uneconomic behaviors. For example, suppose half the population was caught up in a religious fervor or a new cult (this has happened historically - see the Roman Empire and Christianity or modern Turkyie under Islamist rule) that led them to not work as hard, to deprive their children of education, remove women from economic life, to make conspicuous economic sacrifices, accept lower living standards, or to focus on conflict with some "other" group of people internally or externally. Perhaps the simplest manifestation of this risk would be if the US experienced a civil war or insurgency. A collapse in government efficacy might lead to a situation like people in Hati are facing. A less dramatic version of a cultural shift would be for the legalization of cannaboids leading to half the population becoming unambitious, reducing productivity growth and business formation.
Finally, a big war or series of wars could devastate the US economy, government finances, and dollar. After enough time on a war footing, competing countries take over production of domestic economy items, and the US would be left with a massive debt and loss of reserve currency status. This is how the British Empire ended. Ray Dalio has some ideas on this scenario.
But I don't see any of these things happening. US culture is stable because it awards power to the sorts of people who keep it stable, the sorts of folks who hire lobbyists to keep the laws to their advantage and the sorts of folks whose money sets the media/social media / cultural values narratives. US culture has also moved more toward consumption of ads, which convey consumeristic values, which drives economic demand higher and higher, which leads even the most independent among us to keep up with the Joneses in some ways. We could face some insurgency/terrorism, but in the US context any resulting anxiety might simply compel people to consume and work more. People in even the most dysfunctional of cultures resist changing them.
Nonetheless, cultures DO change, and the above risk factors are something to watch for. I've considered that in the scenarios outlined above, a lot of wealth might flow out of the US and into things like Eurobonds, Southeast Asian banks and real estate, Indian stocks, etc. looking for a refuge. 1/6/21 got me thinking about the possibilities for quick changes.
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