Bull markets are emerging outside the US – but you need to know where to look

Fund Manager, Philipp Wörz and Deputy-Chief Investment Officer, Greg Hopkins at PSG Asset Management

Investors have experienced extraordinary times in markets since the beginning of the year. The outlook has swung from exuberance to despair (amidst the announcement of US President Donald Trump’s Liberation Day tariffs on 2 April 2025), and more recently, back to exuberance. However, one element that has remained consistent throughout the roughshod journey this year, is that valuations of US equities have remained at elevated levels. Despite record levels of market concentration, geopolitical risks, and a concerning US debt trajectory, investors have continued crowding into already popular US equities – and the Magnificent 7 (Mag 7) stocks in particular.

This apparent strength masks an increasingly complex and uncertain investment environment. Investors are faced with a market that is both heavily concentrated and richly valued, particularly in the United States.

Nevertheless, despite the risks we believe there are substantial opportunities for investors who are prepared to look beyond the obvious and embrace a truly global, actively managed approach.

Concentration risks in global markets

There is a growing sense of perplexity about how long markets can continue to defy fundamentals. For many years, investors have favoured the world’s largest and most recognisable companies, most of which are US-based and dominate the S&P 500 and MSCI World Indices. This has proven to be a rewarding strategy for an extended period. However, the structure of global markets now poses important challenges:

• US dominance of global indices: The United States accounts for approximately 73% of the MSCI World Index – a concentration level not seen since the 1970s.
• Elevated valuations: The S&P 500 Index currently trades at a forward price-to-earnings multiple of around 23x, nearly 40% above the long-term average since 1990.
• Heightened complacency: Market participants appear largely unfazed by the fiscal, political and geopolitical risks currently facing the US, leaving little room for disappointment.

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