Allocation to US equities – Part 1

The situation  

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Article Type
Insights
Topic
Opinion
Published
June 24, 2025
Read time
5 mins
Authors
Jacob Vijverberg, CFA
Jordy Hermanns, CFA
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The American stock market is typically a large part of investors’ global equity exposure. However, recent developments have raised skepticism and European investors are now reconsidering their allocations to US equities. In this series of short articles we zoom in on positive and negative factors for US equities. We will address topics like innovation, earnings growth, valuation and of course the potential impact of policy changes.

 

Today, in this first article of this series, we explain the starting point most investors are facing: a sizable allocation to US equities.

 

Size of US exposure

Equities represent a foundational asset class in return-seeking investment portfolios. Among global equity markets, the United States stands out as the largest and most influential. As of recent estimates, the total global market capitalization is approximately $130 trillion, with the US accounting for nearly 50% of this total. In comparison, the eurozone and China each represent about 8%, highlighting the significant size of the US market over other major regions.

 

Regional allocation of global equity markets

Chart 1: Regional allocation of global equity markets. Source: Aegon Asset Management, Bloomberg. Data as per 06-2025. Data based on Bloomberg World Large, Mid & Small Index - a float market-cap-weighted equity benchmark that covers the top 99% of market cap of the market.

 

The United States has long been one of the most important equity markets in the world. Its dominance is underpinned by several key factors: competitive corporate sector, deep liquidity, and a strong regulatory framework.

 

Adding to this strength is the US dollar’s role as the world’s primary reserve currency, a robust emphasis on shareholder rights, and the country’s significant economic and geopolitical influence. Taken together, these elements make the preeminence of US equity markets understandable.

 

Institutional benchmarks

The substantial market capitalization of US equities is clearly reflected in global equity benchmarks. Widely used indices such as the MSCI All Country World Index (ACWI) allocate approximately 65% to US equities.

 

The weight of the US in these indices is even larger than the actual relative size of the US markets. These indices emphasize are based on the available free-float and emphasize large-cap stocks both typically favoring the US market. Also some markets, like China, have some form of capital controls, which also lowers their weight in indices.

 

This US weighting has increased by around 10 percentage points over the past decade, driven primarily by stronger US investment returns and a more active IPO market in the US compared to other regions.

 

MSCI All Country World Index (weights)

Chart 2: MSCI All Country World Index (weights). Source: Aegon Asset Management, Bloomberg. Data as per 06-2025.  

This index consists of approximately 2500 stocks, of which more than 500 are US listed. Out of the top 10 holdings, 9 are the US listed. Other widely used benchmarks have a similar profile.

 

 

Constituents

US

US weight

Top 10

MSCI ACWI  

 ~2500  

~525

65%

9 x US  

MSCI World  

~1300

~525

70%

10 x US

Bloomberg DM Large & Mid Cap  

~1200

~525

72%

10 x US

 

As a small sidenote, US exchanges also host a variety of foreign companies. Non-US companies may opt for a US exchange over their local markets due to factors such as liquidity, analyst coverage, valuations, or other reasons. Recent examples include Arm Holdings, a UK-based semiconductor and software design company that listed on the Nasdaq, and Birkenstock, a German footwear manufacturer that listed on the NYSE. These types of listings can somewhat overstate the exposure to the US, though this is only a minor factor. Still, it does illustrate the overall attractiveness and dominance of the US markets, being able to attract US and non-US companies.

 

Nothing lasts forever

The composition of the equity market is dynamic. Currently, the US accounts for nearly half of the global market, having dominated financial markets for decades. However, history demonstrates that market shares fluctuate over time, and today's US dominance is not necessarily permanent.

 

In 1900, the UK equity market was the largest globally, holding a 25% share, while the US had 15%. Over time, fortunes have shifted, with the UK now holding just a 3% share. In the 1980s, Japan briefly took the lead, with 45% of the global market, while the US lagged at 30%. Today, 45 years later, Japan's share has decreased to about 5%.

 

Several factors contribute to these shifts in market dominance, including economic growth rates, technological advancements, wars and conflicts, political stability, and regulatory environments. For instance, the rise of the US market can be attributed to its robust economic growth and innovation in technology sectors. Similarly, Japan's dominance in the 1980s was driven by its rapid industrialization and export-led growth.

 

History shows that regional dominance is more fluid than one might assume, and that many factors – including a political regime shift – can initiate a reset of global market dominance.

 

Regional allocation of global equity markets in 1900

Chart 3: Regional allocation of global equity markets in 1900. Source: Dimson, Elroy, et al. Triumph of the Optimists: 101 Years of Global Investment Returns.

 

Pension funds – reassessing exposures

In 2024, Dutch pension funds invested approximately €300 billion in US assets, a figure that has increased in recent years.

This significant exposure has raised questions about the appropriateness of such a high allocation. Additionally, recent political developments, including political stances and potential taxation changes (see article: Pensions funds beware: Section 899 Stirs Concern), have added another layer to this assessment. It is a top of mind and delicate investment discussion that needs to combine various insights, positive and negative.

 

Allocation to US equities – Series

We recognize that clients may be re-evaluating their equity and regional allocations. With the initial groundwork laid out, we will explore various factors to consider in the upcoming articles. We will address topics like innovation, earnings growth, valuation and of course the potential impact of policy changes. We hope these articles will stimulate discussions and aid in constructing well-informed equity allocations.

Important information

Authors

Jacob Vijverberg, CFA
Head of Asset Allocation

Jacob Vijverberg, CFA, is head of asset allocation. He is responsible for both strategic and tactical asset allocation. The team is managing a wide range of multi-asset funds  

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Jordy Hermanns, CFA
Portfolio Manager

Jordy Hermanns, CFA, is a portfolio manager in the multi-asset group and serves as an investment strategist in the asset allocation team.

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Allocation to US Equities - Part 1 - The situation
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Allocation to US Equities - Part 1 - The situation
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