Look to the U.S. for stock market leadership in 2024

Americans have often been accused, especially by those living abroad, of having a rather narrow view of the world.

Americans’ preference for the U.S. also extends to investing, where they have a homeward bias and a reluctance to snap up foreign investments.

Despite what many pundits say about diversifying away from the U.S., Wall Street has been the best place to be for traders and investors for several years in a row.

The S&P 500 is up nearly 18% in 2024, while the Nasdaq Composite is up 22% in that same time frame.

Few other major markets are close.

Japan, after three decades of notable underperformance, has been one of the exceptions. The NIkkei 225 index is up 23% so far in 2024.

There have also been sizable gains in Argentina and Turkey, but both suffer surging inflation and volatile currencies, making investing in each less attractive than their year-to-date returns suggest.

And then there’s China. The Shanghai Composite is down for the year despite several bullish calls made by international strategists.

But the bulls are stuck in a China shop that has myriad economic problems, ranging from a still-flailing property market to soft domestic consumption, to political and economic policies that are causing China’s trading partners to slap tariffs on their exports.

It’s true that China is taking the lead in the production of electric vehicles and solar panels, and it’s also true that exports have been rising even as tariffs are applied to Chinese goods.

But President Xi Jinping’s “party over prosperity” political model continues to dampen enthusiasm among both foreign investors and domestic consumers.

Of course, the U.S. has its problems.

This is an unprecedented U.S. presidential election in ways too many to mention in a commentary about trading and investing.

But our economy has been not only rock solid but also the envy of the world.

Even as the U.S. economy appears to be slowing and unemployment is edging up, inflation also continues to come down. All of these are factors that could lead to a reduction in interest rates.

Rate cuts could extend the stock market’s rally and power the economy’s recovery.

Depending on the policies of the next presidential administration and the composition of Congress in 2025, that could all change.

But we won’t even have a hint of what’s next for the U.S. until Election Day on Nov. 5.

It’s also true that our nation’s deficits and debts are unsustainably large.

But bond market investors have yet to shrug, knowing that China, Japan, Italy, Spain and other nations have bigger fiscal issues than the U.S.

China’s total debt-to-GDP ratio in 2023 was estimated to be 288%, according to the National Institution for Finance and Development. That’s compared to the U.S.’s ratio of 123% in 2023. Japan’s…