Challenges ahead: sustaining US equity outperformance

Over the past ten years, US equities have delivered an impressive annualized return of 15.5%, significantly outpacing global ex-US equities at 7.7% and UK equities at 6.1%. This exceptional performance has been driven by robust earnings growth, particularly in growth-oriented sectors like technology, leading to elevated valuations. However, replicating such stellar returns in the future may prove challenging, given the high starting valuations and the necessity for unprecedented earnings growth or continued US dollar appreciation. As momentum and overvaluation create a growing tension, investors...