Patience, discipline and Trust

Given all the noise of late - Donald Trump stepping into office, Elon Musk wielding his chainsaw, and the chaos that seems to exist at present, it is understandable that you might wonder how to position yourself in case of a stock market correction.

Since Donald Trump stepped into office, global markets, particularly the US, have experienced heightened volatility (+/- swings in stock market values), with the S&P 500 (US market) down 3.91% year to date as of 14th March 2025. Yes, that’s right, down 3.91%, not exactly the market apocalypse some media pundits would have you believe.

However, it would be understandable to feel a bit unnerved by recent events with markets, so let’s dive into the weeds a bit.

Too much exposure in US equities?

Investing in a global market cap portfolio means allocating to each region (US, Europe etc) based on its share of the global equity market. At present, the US makes up approximately 64% of the global market. This is nothing new.

As illustrated below, US-listed companies have long dominated global equity markets, with the red area highlighting their share over time (the UK share is around 4%!). While US market concentration is currently higher, history shows that global markets are fluid, constantly adjusting as investors move money toward regions with the strongest expected returns. This is nothing new. It is simply the market doing what it has always done: adapting.

While US market concentration may seem high, a closer look at its largest companies tells an important story. Conversations often focus on the influence of the Magnificent Seven: Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla, which now account for approximately 25.1% of the US stock market. This level of concentration in US companies raises concerns about excessive concentration risk. But let’s ask a key question. Are these truly just “US” companies?

As shown in the chart below, more than 50% of the Magnificent Seven’s revenue, on average, comes from outside the US. An important detail often missed by those predicting America’s decline.

Amazon is the most domestically concentrated, with 73% of its revenue coming from the US. Alphabet, Microsoft, Tesla, and Meta generate between 46% and 51% of their revenue domestically, meaning nearly half of their income comes from global markets. Nvidia, the world’s second-largest company, stands out, with only 31% of its revenue coming from the US, highlighting its global reach.

So, is investing in US equities just a bet on the US? Absolutely not. These are global businesses operating in a global economy, and their revenues reflect their worldwide reach.

Aren’t we repeating past mistakes??

One of the most common comparisons we hear is that today’s market is like an echo from the early 2000s, just before the dot-com bubble burst. The story goes like this: technology company values have surged, these values are stretched, and we are ignoring the warning signs of a looming crash.

Now, whilst I certainly can’t guarantee that a market correction is not around the corner. History shows that bear markets (a temporary drop of 20% or more) are an unavoidable part of investing and show up randomly. They are a feature of the system, not a bug. However, a closer look at the data reveals clear differences between today and the dot-com bubble.

The dot-com era was driven by companies with sky-high valuations, much lower profit margins, and minimal cash reserves. In contrast, today’s Magnificent Seven are some of the most profitable businesses in history, generating enormous cash flows and have much lower valuations compared to the dom-com era (when we compare their price to what they generate earnings wise). 

Cash reserves are significantly higher, providing a buffer against economic downturns. But perhaps the most important factor of all is profitability. Companies like Nvidia now boast net profit margins above 50%.

These companies are not speculative startups running on hype. They are cash-rich, structurally sound, and have built dominant positions in global industries. While volatility is inevitable, dismissing the current market as just another dot-com bubble ignores the key strength of today’s technology giants.

What should we do to navigate this market environment?

Market corrections are a natural part of investing. They have always happened, and they always will. The idea that US equities are on the brink of collapse while the rest of the world stages a dramatic resurgence is simply not reality. Markets can and will continue to constantly evolve, and a global market cap approach ensures that if US dominance declines, portfolios adjust naturally without the need for speculation or drastic repositioning.

The collective wisdom of global investors is reflected in a global market cap portfolio. This approach has stood the test of time, adapting as markets shift and capital moves to where it is most productive. It is a strategy built not on predictions or short-lived stories, but on the simple reality that markets work.

History has shown its those who stay invested in a well-structured, globally diversified portfolio fare better than those who attempt to outguess the market. The temptation to react to every headline, every period of volatility, and every prediction of significant change is strong, but ultimately unnecessary. The market has always been fluid, and it will continue to be. The key is having a portfolio that evolves with it, not against it.

The loudest voices out there may well claim to see what is coming next, but investing is not about fortune-telling. Mystic Meg will get it wrong more often than not. It is about patience, discipline, and trust in a process that has been delivered time and again.

Regardless of what Trump or Musk do next, their actions are just noise. Markets do not like the uncertainty some of that noise has generated, and volatility may remain higher for a while. But what truly drives asset prices over the long term is company fundamentals, not the latest headline. The real challenge is not surviving market corrections. It is resisting the urge to believe they require action.

Reach out to team@spentwell.co.uk and we’ll keep your money and life on the right track.

Team Spentwell.

This article was written in collaboration with our wise owls at Timeline Portfolios Ltd, with our Spentwell jargon free spin weaved in to make it as impactful and readable for you as possible.