When it comes to global investment opportunities, the United States consistently tops the list as one of the most luring destinations for investors globally. The attractiveness of US markets is irrefutable, drawing in investors from different countries seeking to capitalize on massive opportunities for high returns.
One of the primary reasons investors flock to the US is its robust and stable economy. The United States boasts the largest GDP in the world, contributing to approximately a quarter of the global GDP. Its economic stability is attributed to factors such as an extremely trained workforce, hi-tech advancements, robust institutional frameworks, and a transparent regulatory environment. These characteristics instill assurance in investors, promising them a solid foundation for their investments.
Being the financial centre of the world, the US provides depth, liquidity and the ability to service trillions of dollars of investments. This market depth provides investors with the capacity to diversify their portfolios across various sectors and industries, mitigating risk and maximizing potential returns.
The New York Stock Exchange (NYSE) is the largest in the world, comprising of 2,400 companies, and has a market capitalization of $24.3 trillion as of May 2023. A series of mergers has helped the New York Stock Exchange garner its colossal size and global footprint. NASDAQ is second on the list of the largest stock exchange in the world. Also, the world’s first electronically traded stock market, with a market capitalization of US$ 20.13 trillion as of May 2023. It comprises over 3,000 stocks listed under it and comprises the world’s tech giants such as Apple, Microsoft, Google, Facebook, Amazon, Tesla, and Intel.
What attracts investors to continuously invest in the US economy is its culture and history of being the center of invention and high-tech progress. It is home to Silicon Valley, which has become synonymous with the tech industry’s epicentre. The US also fosters an environment conducive to entrepreneurship, attracting global talent and capital, leading to significant investment opportunities. Home to top colleges and institutions, it ensures that the best in the world converge towards the US.
Notably, US-based companies are essentially global companies, which is not so much the case with India or China. The likes of Microsoft, Apple, Nike, Tesla, Facebook, Google are born in the US but cater to almost every country, which makes them aspirational all over the world. Investors across the globe are users of their products and services and hence want to be a part of their growth story. Whereas top market cap companies in India and China are essentially catering to the domestic demand and are not as global as their US counterparts.
The US dollar plays a major role as well, being the world currency, majority of global trade is done in USD. UHNIs, family offices and institutions find it safer to invest in dollars thereby de-risking currency fluctuations. The demand for the dollar is steady and only rising, which creates a steady demand and makes it the safest foreign currency to invest in. A strong currency helps creating a robust bond market as well, enabling companies and institutions to raise funds through debt issuance in dollars. This creates a market that attracts investors seeking fixed income and generates more interest in dollar-denominated financial instruments.
The United States continues to be a top destination for international investors seeking to maximize their returns and diversify their portfolios in one of the world’s most prosperous economies.
The US Stock Market accounts for 50% of the world’s stocks by market capitalization. Investing in US markets offers access to one of the world’s largest and most liquid stock markets. The allure of US markets for investors worldwide stems from a combination of factors that create an environment that fosters investor confidence, encourages entrepreneurship and provides numerous investment opportunities.
More importantly, in the digital age, accessing overseas markets is neither inexpensive nor a complex proposition. Regulatory and technological changes have democratized the investors’ ability to invest small amounts and diversify their portfolios with expensive stocks like Amazon and Google. Investors looking for long-term investments and those who can handle volatility are primarily investing overseas.
Source : The Financial Express