Source: Wall Street News

The “seven sisters” of US stocks (Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla) have supported the rise in the US stock market index this year, and this extreme trend continues to expand.

Since this year, the market value of the seven companies mentioned above has increased by nearly 4 trillion US dollars.However, the overall market value of MSCI's global index, which covers nearly 3,000 large and medium-sized enterprises, increased by 3.4 trillion US dollars.

The “Seven Sisters” contributed 40 points to the MSCI Global Index, and the latter's overall growth this year was 37 points.

This means,Without the contributions of these seven companies, the global stock market would have shown a downward trend so far this year.

And with the help of the seven largest US technology companies, America's share of the global market capitalization has risen again—this year is also the eighth year that US stocks have increased in the global market share.

According to statistics, currently,American companies account for 61% of the global constituent stock index, compared to less than 50% 10 years ago.The 10 largest constituent stocks of US stocks accounted for nearly 19% of the index's constituents, up from 8% in 2013.

Is there still room for growth?

This week, the fourth of the “Seven Sisters” — Microsoft, Google, Meta, and Amazon will release financial reports for the third quarter. Although the valuation of US stocks is already “proud of the crowd,” some institutional investors still think there is room for improvement.

According to data from J.P. Morgan Asset Management, the price-earnings ratio of the expected earnings of the S&P 500 index for the next 12 months is about 18 times, while the price-earnings ratio of MSCI constituent stocks in all countries other than the US is 12 times.

Jurrien Timmer, global macro director at Fidelity (Fidelity), believes that big tech stocks “may have more room to rise” because there is currently no obvious catalyst for them to reverse their trend:

The valuation of (non-US stocks) is very attractive... but being cheap doesn't mean it will perform better.

Max Gokhman, Head of Investment Strategy for Franklin Templeton Investment Solutions, said:

When we compare the US to the rest of the world, I think there's a reason US assets have been a better performing asset class for a long time.

Be wary of AI “low tide”

It is still important to note that the rise in the “Seven Sisters” this year is largely due to the boom in artificial intelligence. Since the second half of this year, this enthusiasm has waned somewhat, and the rise in US bond yields has also caused these companies' stock prices to pull back from a high point.

Gokhman believes these seven companies could face pressure next year if they don't get enough tangible benefits from the growth of artificial intelligence.

But he added that even if enthusiasm for artificial intelligence wanes, growth stocks will benefit when interest rates begin to fall.

If we think interest rates will rise from now on, that would be bad for the US, but if we are above or close to peaking... falling interest rates will bring good luck.

The long-term outlook is optimistic

Some institutional investors are concerned about the “monopoly position” of US stocks, as this weakens the position of European financial centers such as London and Frankfurt. Other investors, on the other hand, are optimistic about the long-term prospects of global stock markets.

According to the forecast released by J.P. Morgan Asset Management last week, it is expected that in the next 10 years, emerging markets and developed markets outside of the US will provide higher returns than the US stock market.

David Kelly, the agency's chief global market strategist, said that there has always been a “small portion” of capital flowing to the international stock market. They expect the US dollar to gradually weaken because overseas economic growth is stronger and interest rate differences are narrowing. This will make non-US investments more attractive to traders:

US investors will perform well when they actually think (investing in international stocks) is a good idea.

I think the settlement between US investors and international investors will begin with the depreciation of the dollar.

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