One client note to start: The RSWA office will close at 2:00 PM today, on Friday the 13th (yikes!). This is for a planned Team outing. Please get any requests to us before we close today – thank you!
Readers will note, this is another newsletter formed in our quest to avoid constantly writing about tariffs! 😊 We will be sure to add more about this important topic as the tariff picture and any economic impact on the markets becomes clearer.
American Exceptionalism: The U.S. vs. Europe: American exceptionalism has been questioned recently given the current administration’s tariff policy and retreat from international organizations. With that said, it is hard to argue about U.S. economic exceptionalism looking back over the last few decades. Much of this has to do with the proliferation of advanced and dominant technology companies based in the U.S. Even when compared to the closest economic rival, Europe, the U.S. has performed, well, exceptionally. Here are some startling statistics comparing the U.S. to Europe:
- Over the past 50 years, the U.S. has created, from scratch, 241 companies that each have a market capitalization of more than $10 billion, while Europe has created just 14.
- The typical company in the top 10 publicly traded U.S. companies was founded in 1985, while in Europe, it was in 1911.
- In Europe, venture capital tech investment is one-fifth of U.S. levels.
- Europe has a larger population and similar education levels to the U.S., but only 4 of the top 50 tech companies are European.
- None of the top 10 companies investing in quantum computing are in Europe.
- Productivity (or, output by a worker per hour) has increased significantly faster in the U.S. than in Europe. In the late 1990s, the average EU worker produced 95% of what their American counterparts made per hour, now the Europeans produce less than 80%.
- Despite the larger population, the EU economy is now one-third smaller than the U.S. economy.
There are other reasons tech companies have done well in the U.S. which include less regulation, the culture of taking risks, the speed of making decisions, and the amount of private money looking to invest. Europe has much more regulation, and fewer private investors, leaving investing to the slower-moving and risk-adverse banking sector. Europe does rank highly on quality of life measures and some think this may even lead more to a culture that is less risk-adverse overall. WSJ – The Tech Industry Is Huge—and Europe’s Share of It Is Very Small
Financial Planning/Investment Strategy Corner:
Why Invest in Europe (And Other International Markets)? Given what was written above, why would anyone want to invest in Europe and other international markets? (We actually get this question from clients frequently).
International stocks are gaining renewed attention given the volatility of U.S. markets this year and the recent outperformance of overseas markets. But the benefits of investing outside the U.S. are many.
- Diversification: Currently, more than 40% of global equity market capitalization lies outside the U.S., meaning many great firms are offshore.
- Non-correlation of Performance: Developed international stocks outperformed U.S. stocks in 2022 and are performing well this year. The differences in performance help smooth out overall performance in a portfolio.
- Valuations: International equities, particularly in developed markets, trade at a 30% discount to U.S. stocks based on forward price-to-earnings ratios. Over the next decade, nearly half of the expected returns from these markets could come from dividends, compared to about 25% for U.S. equities.
- Growth Opportunities: Emerging markets are attractive, with economic growth expected to outpace developed nations. For example, India and Southeast Asia are projected to grow at 5–6% annually, supported by rising middle-class consumption and domestic investment. Though we do not invest directly in emerging markets in our current models, many companies in developed markets such as Europe and Japan benefit greatly from their growth.
- Weakening Dollar: The U.S. dollar has been strong the last few years but has been weakening this year. A weakening U.S. dollar usually is a positive tailwind for international returns.
- Europe Rallying? Lastly, it seems like due to the current U.S. policy positions, European nations are working more closely together to strengthen their independence economically. BBC – The New UK-EU Deal at a Glance AP News – Germany Approves Huge Defense and Borrowing Package
International markets offer attractive valuations, higher dividend income, and access to faster-growing economies, as well as diversification and long-term growth potential. Schwab – International Stock Market Outlook
Quick Hits for Summer Travel:
- Why statistics don’t cure flying fears and how to lessen your flying anxiety: BBC News
- Surprising statistic: Over 80% of the world's population has never taken a flight: CNBC
- How to expertly pack for a trip: NYT – Wirecutter
- Should you lock your luggage when traveling – probably: WSJ
- Tips for healthy eating while traveling: DieticianLive
Was Your Mom Right About Standing Up Straight? Slouching is a bad habit many of us have. But having good posture not only makes you look and feel better, but it offers significant physical and mental health benefits. It helps reduce back, neck, and joint pain by minimizing strain on muscles and ligaments, while also improving breathing, circulation, and core strength. From a mental standpoint, standing or sitting upright can boost energy, and confidence, and even reduce fatigue and headaches. On the other hand, poor posture is linked to discomfort, fatigue, and diminished lung function. To improve your posture, check your posture regularly, use ergonomic chairs, engage your core muscles, and take movement breaks throughout the day. Also, simple exercises like chin tucks and shoulder rolls can strengthen postural muscles and increase awareness. So stand up straight, kid!
WSJ - Surprising Health Benefits of Good Posture (Beyond Just Your Back)
The Concept of Kuleana: Kuleana is a Hawaiian concept of responsibility embraced with pride and passed through generations. Unlike the Western view, which often sees responsibility as a burden, kuleana is deeply connected to caring for natural resources, cultural traditions, and family legacies. Sara Kehaulani Goo, a Native Hawaiian, came to fully understand this when her family’s ancestral land in Maui—granted by King Kamehameha III and home to a centuries-old temple—faced a 500% property tax increase. With the land at risk, her extended family united across the U.S. to preserve it. Their mission became more than a financial challenge; it was a calling grounded in kuleana. Goo later wrote a book about the experience, highlighting kuleana as a universal value of honoring both heritage and future generations. In a time of environmental challenges, rising deficits, and unfunded entitlements, the world could benefit from embracing kuleana, reminding us to steward natural resources sustainably and manage economies with future generations in mind. I’m looking forward to adding the book to my summer reading list. Axios Amazon: Kuleana: A Story of Family, Land, and Legacy in Old Hawai'i
Oban, Scotland: I just came back from vacation and spent a wonderful time in Oban and the surrounding area located in the Scottish West Highlands. What a great trip; we saw 5000-year-old standing stones and cairns, plenty of churches, a couple of medieval castles, got to know some locals, and, of course, visited a few pubs as well as the Oban Whiskey distillery. We didn’t make it to any of the nearby islands due to time, but we will on our next visit! I highly recommend a visit if you can get there. 29 Things to do in Oban Scotland - Our Complete Guide
Here's a couple of pictures of the Oban Harbor:
Happy Father’s Day everyone and especially to first-time RSWA celebrators Gerrit and Donovan!
Quote: “My father gave me the greatest gift anyone could give another person: He believed in me.” Jim Valvano, Hall of Fame basketball coach
Thank you for reading RSWA Financial Advisor Insights! We welcome feedback, and please forward this to a friend! Be well, take care, and stay safe!
