For decades, global savers, and American retirement savers in particular, have been taught that you should put most of your money in an S&P index fund — one that tracked the fortunes of the largest US companies — and then forget about it until you were close to retirement. Since the mid-1980s onwards, that has been more or less good advice. American multinationals were, after all, the best way to buy into globalisation, and globalisation was very good for the stock prices of many big companies.
But recently, I’ve begun to wonder — what would it mean if the entire paradigm for long-term investing was to change?
Globalisation as we have known it is on hold. This much we know. But what if we were also coming to the end of a very long period of financial repression, in which declining interest rates have masked another, more fundamental truth. America’s place in the world has changed, and so has the growth potential of its corporations. If that is the case, then we may be in for a correction not just in the stock prices of US multinationals, but in the dollar itself. That would have profound implications for investors everywhere — from individual savers in the US to giant pension funds in Europe and Asia.