The buzz around DeepSeek’s AI prowess has raised questions about the idea of US stock market exceptionalism. Does the US really deserve its steep valuation premium?
Maybe, says Ritholtz Wealth Management’s Michael Batnick, who says US companies are “the best the world has ever seen”. Others, such as veteran money manager Richard Bernstein, say US exceptionalism was the argument to make 15 years ago, but not today due to high valuations.
Similarly, JPMorgan notes in its latest quarterly Guide to the Markets that non-US stocks trade at a discount more than double historical norms. In Europe, the current discount for every single sector is greater than historical averages.
The widespread nature and magnitude of the discounts suggests they are unjustified and “could be attributed to companies simply being listed on foreign indices”.
That’s echoed by Verdad Capital’s Dan Rasmussen. He looked at the top 1,000 firms globally and found half the valuation gap between US and non-US stocks is “explained simply by the location of listing”.
Rasmussen also points to research showing US companies have higher valuations than similar companies listed only outside the US, but not non-US firms cross-listed in the US.
“The Americans will pay a higher premium for good earnings,” said Ryanair’s Michael O’Leary last year, noting that CRH and Flutter’s valuation multiples rose when they listed in the US.
Should a company be pricier just because of where it’s listed? US companies may be good, but their valuations may be even better than they deserve.
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