Market Outlook

July 1, 2026

At Age 250, America Will Remain The Preeminent Nation To Invest

Let’s begin by wishing ourselves a happy 250th birthday!

Let’s also remember that we all enjoy our freedom, and our prosperity, because of the sacrifices made by untold others — the hundreds of thousands of war dead and the tens of millions who have worn the nation’s uniforms. It also cannot be lost on us that for all of our ingenuity, for all our determination and energy, freedom is the bedrock of our nation’s successes.

Of course, self-determination allows capitalism to flourish and, in a relative blink of an eye, it has propelled America into becoming the world’s most prosperous and powerful nation, thereby reinforcing her various achievements.

More recently, America’s stand-alone economic status has become challenged by a country which only one generation ago couldn’t fully feed itself: China. Its economic success has been meteoric having devised a hybrid form of free-market capitalism while still embracing authoritarianism that disavows individual rights and pluralism. That China was allowed into the World Trade

Organization by the West without having ever fully agreeing to, or complying with, the West’s own elevated business, legal and human rights standards has come back to roost. Making matters worse, low-cost imports from ascendant developing markets have slowed economic growth in developed markets, including our own.

1. The U.S. dollar’s reserve currency status. Simply, put, everyone puts their assets in our “hands” and prices their commodities in dollars because we’re the world’s most stable and dominant global power. This may not be politically correct, but America’s debt accumulation, its military power, economic depth and rule of law have no equal in the world.

2. Breadth of public markets. The U.S. is "only" 25% of the world’s GDP but at last count, we’re about 60%+ of global market capitalization. America is the easiest place in the world to start a business and grow it, and it’s our venture capital ecosystem that spurs innovation and attracts the industrious.

3. U.S. technology companies are big for a reason: most are the best in the world at what they do. And when it comes to AI, China-backed Cambricon, for example, may give some U.S. players a run for their money. But our bets are on Nvidia, AMD and Intel, to say nothing of Microsoft, Google, Meta, Amazon, Anthropic, Tesla and others to continue their dominance while also spurring the next generation of machine learning.

4. Energy independence. Oil and gas are abundant in the U.S. (and North America), which if properly managed, can remain an economic and strategic advantage.

Broadly speaking, internationals are faring well this year: on average, they’re up 16.7%, versus a similar 16.3% for all domestic-oriented funds and “just” 10.2% for the S&P 500.

While this appears to be a missed opportunity, the devil is always in the details.

First, the top-performing foreign funds so far this year are in the emerging markets, generally, and Asia, specifically. In most cases, they are beneficiaries of global demand for all things AI-related.

For its part, top-performing Emerging Asia (up 38.7%) is nearly 50% invested in tech, has a 16% weight in Taiwan Semiconductor, and has nearly 60% of its assets in Taiwan and China. Setting aside geopolitical risk (which can’t be quantified or ignored), the fund’s volatility is 46% greater than the S&P 500.

While some of Fidelity’s large-cap growth funds have similar risk characteristics, many (like Blue Chip Growth) also sport superior long-term returns.

As for developed-market funds, most are Euro-oriented or sometimes Japan-leaning. While both markets have some great companies, overall, economic growth trails the U.S., tech innovation is sluggish, while their economies and stock markets are dominated by slower-growth industries like car manufacturing, industrials and banking. State-oversight is also more prevalent in Europe, while the Communist Party has the final word on all aspects of China’s economy.

It’s also worth noting that while our preferred U.S. stock funds are largely void of foreign holdings, top positions often derive the majority of their sales and earnings from outside the U.S. For example, Apple derives 57% of its earnings from abroad whereas Facebook’s Meta gets 62% of its profits overseas.

In fact, 35% to 40% of S&P 500 earnings are from abroad, whereas the Nasdaq Composite derives more than half its earnings overseas. And, at the risk of over-emphasizing that point, many of the market’s largest mega-cap tech companies are even more dependent on foreign sales for sales and earnings.

A final point on that score: Owing largely to their stakes in Low-Priced Stock (which is 39% invested abroad) the Growth & Income and Income Models have double-digit weights in foreign equities, whereas the Growth Model derives its more modest (9%) foreign exposure from several U.S. stock funds. So while it appears that our models are completely reliant on the U.S. market, that isn’t exactly the full story — we simply have a different approach to investing abroad.

In a global economy, holding U.S. stock funds provides the benefits of international exposure without the downside risks (political instability and exchange-rate risk) that can be inherent to holding foreign funds directly.

— John Bonnanzio