When it comes to US equities, it seems quite a lot.

Post Trump’s presidential victory, it seems there is only one place to invest – US equities.

This was due to the surprise landslide of Trump and was accompanied by a sharp rebound in the US compared to almost every other market in Q4 2024, leading to any portfolio underweight in the US suffered exponentially. We also witnessed the Magnificent 7 stocks rising even more than the S&P 500:

But so far, 2025 has seen a more level playing field:

At MoneyShe our contrarian mindset leads us to hold a view very different from mainstream investment strategists.

Our view is that many of the large US stocks which have driven the US performance are now massively over-extended, like an elastic band, and whilst we cannot predict when this band will snap, it seems inevitable it will at some point soon.  In some cases, for example Tesla, the values are bordering on a complete bubble.

Any investor thinking that buying a global equities index fund gives them good diversification is fooling themselves.  For example the MSCI World Index is now 72% US and dominated by a handful of US tech stocks – Nvidia, Apple, Microsoft, Meta, Tesla and Alphabet represent about 24% of the index!

Coming back to Tesla as an example of the US tech bubble – no doubt his close friendship with Trump (should it last) will help the company, but should its value have doubled since Mr Trump’s victory?

Last week Nvidia presented at the US Consumer Electronics Show (CES), announced that “it will supply its advanced semiconductors to Toyota to help the Japanese automaker develop technologies related to autonomous vehicles.” Along with software that can handle the manoeuvring of such vehicles.  Nvidia CEO Jensen Huang said, “I’m super, super pleased to announce that today Toyota and Nvidia are going to partner together to create their next generation of AVs.”

Given that Tesla is worth almost double virtually every other motor company combined, and its valuation relies on its future autonomous driverless taxis and Toyota is the largest car company by size, what do you think happened to the Tesla price on Monday.  Virtually nothing!

The below chart shows the valuation of Tesla against other car companies.  BYD at the bottom is the Chinese EV company that now outsells Tesla but is worth just 12% of Tesla in terms of its market cap:

There are plenty of scary charts at present regarding the US market:

I estimate that on a comparative basis the non US tech stocks are about 15% over-valued, with the Magnificent 7 stocks much more overvalued.  For example, the market darling is currently the AI chip company NVIDIA.  This is the value of its future cash flows compared to its current market value according to Simply Wall Street; 38.5% over-valued:

Sooner or later the elastic band will burst, and many funds will realise (too late) how over concentrated their funds were in the handful of US titans.

Alan Miller, Chief Investment Officer