With an estimated GDP of approximately USD $14.5T, the US economy is the largest economy in the world. This would not be the case were it not for the US stock market.
Many investors will live and die by the notion that trading in foreign markets robs the US of much needed capital. Many foreign investors agree. That being said, domestic investors in the US stock market now stand shoulder to shoulder with foreign investors who feel that the US stock market is rich with opportunity.
So what is it about the US trade market that foreign investors find so attractive?
Let’s examine some of the perks.
It may not seem like the United States has a fantastic track record, given that we are now inching our way out of a double-dip recession, but historically, the United States has seen substantial returns. As it begins to recover from its recent crash, the US trade market continues to post gains, albeit slowly. Many economists suggest that as the US economy stabilizes, the world’s economy will stabilize alongside it, giving foreign investors incentive to ante up.
Another incentive is that foreign investors are not required to pay taxes on capital gains earned as a result of investing in the US stock market. Similarly, foreign companies who invest in US real estate are not required to pay taxes on capital gains earned during the sale of assets.
The U.S Stock Market is Consumer-Friendly
Economies fail when consumers don’t spend enough. When they spend more than they need to, the economy is constantly in high gear. One of the reasons that the United States stock market has done so well in the past is that US consumers are not afraid to spend money. This is good news for investors who wish to buy into US consumerism trends.
The inherent volatility of the US stock market affords investors the opportunity to buy lower and sell higher, leading to rapid and substantial gains. Losses of equal value are quickly earned back if the stock is left alone, a notion that many domestic investors struggle with.
Transparency and Information Accessibility
One of the reasons that US stock market has become a point of interest among foreign investors is the governance of its assets by the US Securities and Exchange Commission. Companies that trade stock in the US stock market are required by law to report quarterly earnings to the public. In many foreign countries, where censorship laws trump the exchange of valuable information, this law has not been passed yet. Perhaps adding an American flag to your stock portfolio could be a profitable venture for your portfolio.
Additionally, demographical information about virtually any company, especially those who trade in the US stock market, can be accessed online, and a little research into how the company’s stock has behaved historically can lead prospective investors to an instant decision. If they choose not to invest in a particular company for one reason or another, it won’t take them long to find one they’re comfortable with if they really have their heart set on investing.