Chart 2: Investors already pay more for US equities
MSCI indices. Source: LSEG Datastream, Fidelity International, September 2024.
Another long-term factor that could hamper US exceptionalism is the country’s large fiscal deficit, currently running at around 7%. Neither of the two main political parties appear interested in reducing it and US public debt is growing fast. Eventually it could require a period of fiscal austerity to bring it under control, which would dampen US economic growth. Finally, the US enjoys the privilege of controlling the world’s reserve currency. Although we don’t expect the dollar to be usurped anytime soon, even a reduction of its dominance could have knock on effects on US equity markets.
Diversification still key
The long-term fundamentals for US equities look positive on a relative basis. However, other factors such as technicals and valuations, as well as shorter-term fluctuations, also play a role in our investment decisions. We will continue to evaluate markets using our comprehensive investment framework.
Having said that, we still firmly believe that diversification is critical to achieve long-term risk-adjusted outperformance, not just across asset classes, but across regions, sectors, and styles. Unexpected events will always occur, making an approach that combines a broad range of risk and return drivers an essential component of a robust long-term portfolio.
Our Multi Asset Allocator range
We advocate taking a long-term diversified approach to investing and Our Multi Asset Allocator range is an example of a fund offering which gives investors the opportunity to access different asset classes and regions at low-cost - supported by a well-resourced and experienced team of research analysts. The range is rated by the major risk rating agencies, enabling investors to select the level of risk they are comfortable with.
From the Fidelity Multi Asset team
Find out more about Fidelity’s Multi Asset Allocator range
Important information
This information is for investment professionals only and should not be relied upon by private investors. The value of investments and the income from them can go down as well as up and clients may get back less than they invest. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. The investment policy of these funds means they invest mainly in units in collective investment schemes. Fidelity’s Multi Asset funds use financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Changes in currency exchange rates may affect the value of an investment in overseas markets. Investments in emerging markets can also be more volatile than other more developed markets. The value of bonds is influenced by movements in interest rates and bond yields. If interest rates rise and so bond yields rise, bond prices tend to fall, and vice versa. The price of bonds with a longer lifetime until maturity is generally more sensitive to interest rate movements than those with a shorter lifetime to maturity. The risk of default is based on the issuers ability to make interest payments and to repay the loan at maturity. Default risk may therefore vary between government issuers as well as between different corporate issuers. Due to the greater possibility of default, an investment in a corporate bond is generally less secure than an investment in government bonds. Issued by FIL Pensions Management, authorised and regulated by the Financial Conduct Authority. Investments should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document (KIID), current annual and semi-annual reports free of charge on request by calling 0800 368 1732. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited UKM0924/388314/SSO/NA
