The S&P 500 has risen from around 680 points in early 2009 to over 2000 points now, while the Dow Jones Industrial Average has gone from a lowly 6600 to close on 18000.
Such is the strength and length of this run, many are questioning whether as an asset class, the ship has sailed and broadly speaking, the only way is down.
There is some clear logic to this view. Stocks have received a sustained and unprecedented uplift from the Federal Reserve’s vast quantitative easing programme. This has come to an end but markets have yet to fully understand the implications.
Then there is the increasingly strong US dollar boosting domestically focused companies. The US has vast numbers of businesses which operate in a bubble sandwiched between the Atlantic and Pacific oceans. The rest of the world could disappear and many of these companies would be largely unaffected.
However it could be argued this is fully priced in already as it has been taken as a given the dollar will stay strong for the foreseeable future because of loose monetary policy in Europe, Japan and elsewhere around the world.
If you subscribe to these views then increasing weightings to the US from here on is clearly not the way to go, particularly for growth seeking investors.
This assessment is too simplistic however, as it does not take sufficient account of the wide variety America has to offer.
Instead of giving up on the idea of riding the US gravy train, investors will just have to be more selective.
The quality end of the small and mid-cap space for example, represents an interesting opportunity.
According to Hermes’ US equities manager Mark Sherlock the QE years led to an artificial boom for the lower quality US stocks. Now that the Fed has turned off the tap, investors will go back to basics and seek out the quality companies, Sherlock said.
Unglamorous companies with economic moats are another example. Sherlock cited rock transportation company Martin Marietta as a prime case in point. It benefits from local monopolies due to the price of rock relative to its transportation costs.
What these examples show is that smart investors can always find buying opportunities in the world’s biggest and most varied economy, even when it looks decidedly toppy overall.