US investors have an average exposure of 15% in foreign shares, a good part of the global investment diversification of their portfolios is carried out implicitly through the multinationals corporations (MNC) that make up the S&P 500. After all, a fund that emulates the evolution of this indicator not only has a minimum fee of less than 0.1% in most cases, but is also exposed to values such as Coca-Cola or Google, whose income depends in large part on the international market. By region, 75.9% of sales come from the Americas, 11.1% from Asia Pacific, 10.6% from Europe and 2.4% from Africa or the Middle East. If we focus on specific countries, 70.9% of revenues are US, 4.3% are Chinese, 2.6% American and 2.5% United Kingdom.
During the first quarter, the S&P 500 companies that generated more than half of their revenues outside the United States registered an average growth in their profits of 29.6% compared to 22.7% of those companies most focused on the home market. And it is that the tax reform of Trump has given air to the profit estimates and has caused the S&P to quote a profit multiplier of 16 times, the lowest in a year and a half. “The S&P 500 has a significant exposure to foreign markets, and as such, both domestic and global events, as well as policies that change the dynamics between the United States and the rest of the world, can have potential effects on the indicator,” as mention by Phillip Brzenk, director of analysis of S&P Global Indices.
US Equity Market
In general, the US equity market is intrinsically linked to foreign companies. Although many of these companies will not be part of the S&P 500 or the Dow Jones, the liquidity offered by the capital market on this side of the Atlantic increases the appetite for trading in some of the main US stock markets. From the New York Stock Exchange, its director of global listings, John Tuttle, says that the goal of foreign companies that are opting to debut on the stock market in the United States, “they do it for the level of liquidity and to raise their profile.”
With these factors in mind, Innosight experts estimate that, at the current rate, almost half of the components of the S & P 500 could be replaced over the next decade. A situation that shows that this indicator is not immune to disruption and this is a positive characteristic since it forces the transformation of the index in line with the trends of the economy.
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