U.S. markets continue to outpace their global counterparts in 2024, with the S&P 500 up 10% for the year compared to just 4% for developed markets outside the U.S. This trend of strong growth compared to the rest of the world has been ongoing for over a decade, with the S&P 500 nearly quadrupling since 2004. The main driver of this trend is faster earnings per share growth, with earnings for the S&P 500 up nearly 47 times that of the broader global market over the last 17 years. The U.S. economy has been fueled by strong consumer spending and a solid jobs market, despite challenges such as high inflation and interest rates.
Historically, the U.S. economy has been more consumer-driven than counterparts in Europe and Asia, contributing to steady earnings growth for U.S. companies over a longer period of time. Stock buybacks have also increased, inflating earnings, and big tech companies often dominate the movement of the S&P 500, skewing growth for the benchmark index. The lack of earnings growth in developed markets outside the U.S. has left investors looking for opportunities elsewhere. Recent reports on jobs, manufacturing, and spending have reaffirmed the strength of the U.S. economy, though inflation remains high, adding uncertainty to hopes for interest rate cuts.
The strong economic data in the U.S. bodes well for investors focusing on earnings growth as a key investment consideration. A recent jobs report for March exceeded expectations and helped rally stocks. The European Central Bank and the Swiss National Bank have hinted at potential interest rate cuts, which could boost confidence in the European economy. Japan’s central bank has also raised interest rates for the first time since 2007, signaling a potential uptick in corporate investments by Japanese companies that could benefit shareholders. However, China’s economy continues to face challenges with weak consumer spending and lackluster income growth.
Investors are closely watching developments in global markets, particularly in the U.S., Europe, Japan, and China, to gauge future investment opportunities. The performance of the S&P 500 and other key stock indices will be influenced by factors such as consumer spending, corporate profits, government policies, and global economic conditions. Despite uncertainties related to inflation, interest rates, and geopolitical issues, the overall outlook for global markets remains positive. Investors will need to carefully assess risks and opportunities to make informed decisions and navigate the complexities of the current economic landscape.
