Is the US still “exceptional”?

I wrote a piece last year noting that my Aussie dollar stock portfolio was proof-positive that Aussie shares, by-and-large, struggle to grow over time. The income is top-tier, and that's an important component of total return, but if you need or want growth (an important distinction), I waited for the portfolio to push over a threshold amount and day-after-day, week-after-week, even month-after-month, it wouldn’t do it.

Well, gosh dang it, it finally did it - my AUD portfolio has blown through that threshold, starting in late November and through the rally th……oh, hang on. What’s that? You say that rally ended a few weeks ago and we’re back to levels from 10 months ago??

Through October 2025, the local AUD investment versions of both the Nasdaq 100 and the S&P 500 were comfortably above the investable version of the ASX 200 for calendar 2025. But since then, the ASX 200 has handily outperformed the US indices, as have many global markets including Germany, Japan, and the broad emerging markets complex. So have other asset classes like commodities, real estate, and the grand-daddy of them all for a moment or two, gold.

In fact, for 2025, the Nasdaq 100 vehicle was up 11.70%, the S&P 500 vehicle was up 9.20%, and the ASX 200 vehicle was up 10.36%. Essentially on par with my personal preference of 50-50 between the two major US indices. Throw in the income, which is much better in the ASX 200, and the result tilts towards said ASX 200.

Now, I wonder if this has ever happened before??

It turns out, it has. Just to focus on the 21st century, it happened leading into the tech crash of 2000 (which a lot of people forget was a double-up because of the 9-11 terrorist attacks – it wasn’t all the tech crash). Have a look at this chart:

Then it happened again, leading into the 2008 financial crash. The bulk of that outperformance was down to one thing, and one thing only – selling massive amounts of minerals to China as they built an unprecedented level of infrastructure, to the point that it is, today, holding back their entire economy. Look at this chart:

And the most recent time that the ASX has outperformed US markets is during the inflation-induced downturn of 2022 that drove global interest rates higher, look at this chart here:

Have you picked up on the pattern? The ASX tends to outperform US markets when things are going wrong. When things are going wrong, growth gets questioned, then valuation premiums get pressured, and as soon as volume spikes, the selling starts in earnest and there’s often an overreaction.

None of this contradicts a couple of views I hold and have made very public. That is, when you need income, it’s very hard to go past fully franked Australian dividend payers as they are juicy and reliable streams of cash that have tax benefits to Australian resident taxpayers. However, when you need growth, there’s simply no evidence that Australian stocks should be your weapon of choice.

Look at this chart below over 7 years:

And then this one over 20 years.

This is the thing about many Aussie-centric investors and Aussie-centric advisers - you can’t pick-and-choose when you’re a long-term investor: you either are one, or you aren’t. You can’t tell your Australian equity investors to look through the smoke when turbulence hits our market, but then decide it’s time to jump the US ship when the ASX outperforms, or any other market outperforms, for 8 or 10 minutes. And there is no doubt at all that when it comes time to find the best tool for long-term growth, that tool is in US markets.

Take a look at these 2 charts - - one over 5 years, and another over 35 years.

Read that again - that when it comes time to find the best tool for long-term growth, that tool is in US markets. That leads into my last thing…..I was recently described by someone on this platform as being “all in on the US”.

I want to be very clear about something – I am NOT all-in on the US.

If you’re a fund manager, you’re in a very different business to me. The business you’re in as a fundie is solely an investment business. Driven by whatever your mandate is, you’re looking for the best returns in that space, and if you have other ideas you like, with any luck, the returns in those initial ideas come in a relatively short period of time so that you can rotate to those other ideas if they remain compelling when the first ideas have become less compelling. And as a fundie, you hope ideas become less compelling because those ideas have done what you expected (something like, “it’s gone up X% in Y time”).

That’s good funds management. But I’m not in that business.

I’m in the wealth management business, and in our business, the investing part comes right at the very end. Long before we deploy a dollar, we need to understand a client’s goals, the path they want to tread to get there, their risk profile, their income, their expenses, the rest of their balance sheet, their legacy goals, how they feel about their mother-in-law, and a variety of other factors.

My point is, to the extent all of that work leads to - - right at the end of the process mind you - - someone requiring a growth component in their portfolio, then yes – for that component, I’m all-in on the US. And why wouldn’t I be?? Look at the charts earlier in this piece, and look at the charts I’ve posted on this platform over the last few years.

If someone needs income, I don’t go to the US. If someone requires infrastructure or other hard asset exposure, I don’t solely focus on the US. If the portfolio needs diversification, I don’t focus on the US. For commodities, private credit, investment grade fixed income, none of those asset classes, in my view, mandate a focus on the US.

The pieces in a private client portfolio should all be in there for a specific reason and to do a specific job. The job of growth, in my opinion, is best served by exposure to the US. If the facts change, my opinion will change.

But the facts haven’t changed in some time, and look unlikely to soon.

Good luck out there.