The Case for Investing in the U.S. Despite Global Economic Concerns

In his 2022 Berkshire Hathaway shareholder letter, Warren Buffett wrote that in his 80 years of investing, he had “yet to see a time when it made sense to make a long-term bet against America.”

Buffett’s words have rarely been more relevant. With only a day remaining before the presidential election, history shows that regardless of who’s in power, the U.S. has consistently outperformed its global peers and rewarded those who stayed the course.

That’s why we made the tough yet necessary decision two years ago to close our Emerging Europe fund. Why? Because, compared to the opportunities here at home, Europe just isn’t competitive. Sluggish growth and regulatory hurdles weigh heavily on the continent’s economic potential. Outside of its massive luxury market, Europe is a cautionary tale, reminding us of the risks of over-regulation and slow-moving policy.

America Remains the Innovation Leader

Despite all the predictions of a recession, the U.S. economy is leading the pack. According to the International Monetary Fund (IMF)’s most recent projection, the country is on track for 2.8% growth this year, outpacing every other G7 economy.

Just look at the tech sector: The vast majority of the world’s leading tech companies are based in the U.S., benefitting from robust early- and late-stage financing, an unmatched talent pool and a regulatory environment that—while imperfect—allows businesses to grow and thrive. Over the past few decades, America’s ability to foster true innovation giants—like Apple, Google and Amazon—has only strengthened.

Europe, by contrast, lags behind, shackled by red tape and an over-cautious approach to investing in new technologies. This past summer, in fact, Meta (Facebook) and Apple pulled back from rolling out key products in Europe due to regulatory hurdles. To be clear, Europe has plenty of strong universities and bright minds, but its draconian laws stifle its own growth.

America Innovates While Europe Regulates

In the past two decades, the U.S. stock market has been a powerhouse. Just before the 2008 financial crisis, the market cap of the S&P 500 was marginally higher than that of the STOXX Europe 600. Since then, the U.S. market has expanded eightfold while the European market has barely budged. Companies across the Atlantic are now listing on U.S. exchanges, drawn to our more dynamic financial markets.

When I look at Europe’s economic trajectory, I can see why many people are hesitant to invest there. Again, we closed our Emerging Europe fund because of these same issues. While America innovates, Europe regulates. And as more businesses gravitate toward the NYSE and NASDAQ, the reality is clear: America remains the best place to invest, even in times of political change.

I’m not alone believing that. According to the Conference Board’s most recent survey of investors, a record 51.4% of respondents said they expected the current stock market rally to continue over the next year.  

The Challenges Here Are Real but Manageable

To be fair, the U.S. isn’t without its own set of challenges. National debt has climbed to $35.8 trillion, and consumer credit card debt is at a 20-year high.

Inflation may be down from its peak, but the risk of a resurgence remains. Many remember the double-digit inflation spikes of the 1970s, fueled by government spending, an oil crisis and a weakening dollar after the collapse of Bretton Woods. Some fear a repeat scenario today as debt continues to climb. But let’s remember that even during the 1970s—one of the most volatile decades for the U.S. economy—investors who stayed the course were ultimately rewarded.

The Case for Staying Invested in America

Many readers may be concerned about the upcoming election and the policy shifts it could bring, but betting against America is not a winning strategy. In boom times as well as bust, the U.S. has outperformed. Our economy is innovative, and our financial systems are built to withstand change. Political cycles come and go, yet America continues to lead the world in growth and opportunity.

Remember Buffett’s words: Betting on America has historically paid off. And with the right strategies in place—like a healthy allocation to gold—you can continue to build and hold your wealth for generations to come.

Past performance does not guarantee future results. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

The S&P 500 is a market index that represents the performance of about 500 companies in the United States. The STOXX Europe 600 index represents large, mid and small capitalization companies across 17 countries of the European region.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more of U.S. Global Investors Funds as of 9/30/2024: Amazon.com Inc.