Investing.com -- The U.S. may account for just 4.2% of the world’s population, but its influence on global equity markets is staggering: the S&P 500 alone now represents over 50% of the total global equity market capitalization, according to Wells Fargo (NYSE:WFC) analysts in a note Thursday.
The remarkable figure, they emphasize, “isn’t a typo,” but rather a testament to the strength and resilience of the U.S. market.
The bank says the U.S. continues to dominate due to several unique advantages, including “the depth of capital markets as a whole and the strength of the U.S. consumer.”
Wells Fargo analysts attribute this outsized influence to robust consumer demand, with consumer spending driving about 70% of U.S. GDP.
This demand, combined with a supportive governmental and regulatory environment, has allowed American innovators to build “the largest economy in the world by far,” adds Wells Fargo.
As the global economy is expected to see a modest recovery through 2025, Wells Fargo anticipates the U.S. will remain at the “leading edge” of this rebound, aided by fiscal strength, a resilient consumer base, and a dynamic tech sector.
The bank adds that global markets, particularly China and developed economies outside the U.S., face structural challenges such as “excess regulation, insufficient regional economic integration, and declining populations,” which may restrain their growth.
While the U.S. dollar is projected to appreciate further, Wells Fargo recommends favoring large-cap U.S. stocks, which are well-positioned to maintain market leadership as international markets continue to face hurdles.
With a bullish outlook for U.S. equities and a watchful stance on small-cap opportunities, Wells Fargo advises investors to “stay patient” while keeping a keen eye on the opportunities that arise in the dominant U.S. market.