Stock markets are driving a new American century

THE worldwide dominance of US equities is increasingly obvious. Of the top 10 components of the MSCI global stocks index – which itself now consists of about 70 per cent US stocks – eight are US technology companies. The S&P 500 has breached the 5,000 level. On most days, Apple or Microsoft alone is more valuable than the entire stock markets of major European countries. By one estimate, publicly traded US firms accounted for 44.9 per cent of global market capitalisation last year.

All these gaudy numbers raise a question: Is the world on the cusp of a new American century, at least in the corporate realm? The answer is a qualified “yes”.

One reason why US equities are gaining in relative terms is that the Chinese stock market has been crashing. China’s stock market has not traditionally been very representative of the broader Chinese economy, but this decline in equities coincides with broader economic troubles: a burst real estate bubble, local government debt problems, and high youth unemployment. The risk is rising that China’s economic future lies with state-owned enterprises, rather than private capital.