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AI bubbles. Market corrections. Warnings of a looming crash.
If you've been following US market headlines lately, it can feel like there's only one story being told: that Wall Street is due for a reality check. But is that the whole picture?
Lately we've noticed some shifts in behaviour that suggest some investors are looking to reduce risk. Searches for investing in gold and silver are up, deposit amounts are a little smaller, and more investors are favouring exchange-traded funds (ETFs) over individual stocks. One trend stands out in particular: investors looking beyond the United States. The Total International Stock Vanguard ETF (VXUS) – which invests in companies outside the United States — has slipped into Hatch's top ten most traded investments this month.
So what's driving the interest in looking beyond Wall Street?
How diversified is the S&P 500?
Many investors own broad US index funds such as those tracking the S&P 500. While these funds hold hundreds of companies, a large portion of their value is concentrated in a handful of mega-cap tech stocks.
Today, the five largest companies in the S&P 500 account for over 25% of its market cap. When those companies move, the index often moves with them.
Top five change month to date
- Apple (AAPL) +15.52% briefly hit US$5 trillion become the world’s most valuable company
- Nvidia (NVDA) - 0.29% just announced a new partnership with SK Hynix (SKHY)
- Microsoft (MSFT) +2.36% announces Q2 earnings tomorrow
- Amazon (AMZN) -4.48% announces Q2 earning this week
- Alphabet (GOOG) -7.07% has a US$920 million a month deal with SpaceX (SPCX)
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How can investors get exposure to stocks outside the US?
Let's set the scene. The US share markets are huge. The NASDAQ and New York Stock Exchange make up around 43% of the total US$149 trillion market capitalization of all global stock exchanges. At roughly US$107 billion, the entire NZX is worth less than Starbucks (SBUX), whose market cap sits at around US$117 billion. That's right. The company that patented the frappuccino is worth more than our entire exchange. ☕
There are over 100 different stock exchanges around the world. You can access some of these from NZ, but not all. To invest globally, some investors choose to go for total world funds that often still have exposure to the US markets, or ones that track indexes in specific countries:
- Korea - South Korea MSCI Capped ETF iShares (EWY)
- Europe - Europe ETF FTSE Vanguard (VGK)
- China - China MSCI ETF iShares (MCHI)
- Japan - Japan MSCI ETF iShares (EWJ)
- India – India MSCI ETF iShares (INDA)
Investing outside the US doesn't remove risk. Different countries come with different economic, political, and currency risks. But it can provide exposure to industries, companies, and growth opportunities that don't exist in the US market.
What should I do?!
When markets feel uncertain, it's natural to question if you’re doing the right thing. Your health is your wealth, and if your investments are stressing you out and keeping you up at night, it might be time to sit down and decide how much risk you’re comfortable with. Focus on what you can control — your goals, your timeframe, and your plan. 📈🌎
Read more: When should you sell shares?
We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.
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