US stock market soaring: Investors benefit from Trump and record profits!

US stock market soaring: Investors benefit from Trump and record profits!

The US stock markets are experiencing a real boom that is astonishing investors worldwide. As the NZZ reports, no other stock exchange has created as much wealth in recent years as the American one. Anyone who invested $10,000 in US stocks in 2000 could own over $27,000 today - adjusted for inflation! In comparison, European stocks have only reached a value of around $16,000. The S&P 500 has already increased by 24 percent this year, while the Euro-Stoxx 600 has only grown by 6 percent.

The dominance of US stock markets is undeniable. This superiority dates back to the early 20th century, when the U.S. stock market achieved an annual real return of 7.0 percent while the rest of the world only achieved 4.9 percent. Analysts at JP Morgan are optimistic and believe that American companies will continue to generate above-average returns in the coming years. Grace Peters, who leads global investment strategy at JP Morgan, predicts a long-term return of 6.7 percent for blue-chip stocks.

The Future of US Stocks

The fundamental strength of the US economy is another reason for the ongoing upward trend. Peters expects average gross domestic product growth of 2.0 percent over the next ten years, while the euro zone is only expected to achieve 1.4 percent. The large American corporations have managed to increase their profit margins to record levels and are therefore in a position to further expand their role as profit machines.

However, valuations of US stocks are high. The price-to-earnings ratio is 24, while European stocks are only 14. Peters acknowledges that these high valuations somewhat reduce the long-term return potential, but she sees no cause for concern. The large tech companies dominate the market and have a market capitalization that corresponds to the entire market capitalization of the 27 EU countries. However, this concentration also poses risks for investors, as the three largest companies - Apple, Microsoft and Nvidia - already account for 13 percent of the world stock index.

Europe's answer to the boom

But Europe also has its stars. The so-called Granola stocks, which include companies such as GSK, Roche and Nestlé, are the counterpart to the American tech giants. Peters stresses that investors should not lose sight of the risks, particularly the possibility of a return of inflation. In this context, she recommends considering gold as an addition to the portfolio as well as investments in infrastructure.

The current market situation is characterized by positive momentum, which is supported by interest rate cuts by the US Federal Reserve. The Fed cut interest rates by 25 basis points, providing additional stability to markets. The signs are good that the upward trend in American stocks will continue in the future NZZ finally stated.