The Global Stock RESET Is Here (Most Aren’t Ready)

Sell America. That's what all of the analysts want you to believe. But you might think that you've got global diversification holding the MSCI World ETF, maybe you've got a sprinkling of other companies here and there around it, but you're not aware of the risks and how this is likely to affect your portfolio, not only this year, but years going forward, because there are literally trillions of dollars of capital rotating away from US markets, not only in stocks, but also in bonds. And creating this cascade effect of dominoes as they fall, which are likely to affect the majority of the market and potentially your portfolio in that as well. Now, if you're new to the channel, I'm James. I'm a former professional trader turned financial educator. And in this video, I'm going to break down exactly what this means, how to position for it, and also the opportunities that lie ahead, which are quite exciting away from America, just as the big boys are latching onto now. So without further ado, let's break down exactly what we mean by Sell America. Overseas investors have had enough of Trump, they've had enough of his invasion of Greenland, had enough of inflation, the dollar hegemony, and essentially, they've found better alternatives elsewhere. And that means that they're quite up for selling bonds, selling stocks, and moving on with their lives, so to speak. And this creates something of a loop. When they sell stocks or bonds, they receive US dollars. and they have to convert those back to euros or the home currency. And that has a further cascade effect in this kind of vicious cycle of then putting more pressure on the very area of the market, US tech, that accounted for more than 50% of the S&P 500's overall return once again in 2025. So the double bubble that benefited investors for the last 20 years, where both US stocks rose and the US dollar strengthened, is out the window, and that's now starting to work in the opposite direction. And hence the big funds are selling America. People are carrying way more US exposure than they realize. So take the MSCI World ETF. I've shown this in my other videos, but you can see how 71% of its exposure is in US stocks. For a supposedly global ETF, that's crazy. When you see the sector breakdown Big tech is first and foremost 26% of the overall weighting. So beware of this potentially unintended concentration that you've got in US tech if you own something like the MSCI World ETF. Loads of people online talk about it as this holy grail of diversification, but really it's not. And that leads me to the next instinctive reaction, which is fine, I'll just invest outside of the US or go defensive. But that creates a second problem, and it's where a lot of people come unstuck. If US stocks are set to fall, the obvious answer feels like moving outside of the US or taking shelter in defensive sectors or perhaps bonds. But the problem is that markets don't operate in these neat little boxes, and as Stan Druckenmiller famously put it, the obvious is obviously wrong. In many cases, actually, just introduces a different set of problems, and that's market timing. Think of it in terms of risk-on and risk-off. It's something known as beta, but in essence, all assets are correlated to this, even sectors. For example, if we look at the industrials to consumer staples in the US, when this is rising more cyclical, risk-on industrial stocks are faring better than consumer staples, which are more defensive. And it's the same pattern that plays out time and again here. So everything is ultimately correlated. Most global markets are therefore driven by the same forces and still moving that cycle, as we've just seen. So If geography isn't the solution, the next step is to change what you own, not just where you own it. And that brings us to something that I built my career on as a macro strategist and a fund manager: factors. Quality investing has become quite popular in the last few years because it's seen as a more practical way to invest through the entire business cycle. What you're doing is looking for these strong dominant industry leaders that have these resilient balance sheets, very high returns on capital usually, and the ability to basically support themselves and sustain growth even when conditions tighten. And historically, that combination has seen better returns with lower risk across multiple markets, not only in the US but globally, which is exactly what you want if markets in general are becoming more fragile. There's plenty of these quality factor ETFs out there, but once again, a lot of them are still full of US tech. Let's have a look at some of the options here. The first is the MSCI World Quality ETF. We can see that it has a similar concentration to US stocks to that of the regular MSCI World ETF. In fact, it's a couple of percentage points higher at 73% versus 71%. So this is even more US concentrated. When we look at the names here, once again it's really about tech. Nvidia, Apple, arguably consumer slash tech, Microsoft, Visa and Mastercard. Whilst they're payments networks or financials, I would consider them to be kind of tech. And then certainly with the likes of ASML being semiconductors, Meta being social media and AI as a platform, and Google is still very, very tech-heavy. And you can see that here with a 27% sector weighting. But there is an alternative which you might want to consider here. It's an MSCI World Quality ETF but excluding the US. About 15% in the UK, similar amount for Switzerland— presumably that's Nestlé, possibly Roche— and a fairly even split then across the next 4 countries, and then the bottom 4 or so countries. When we look at the sectors, how refreshing is this? Big Tech only accounts for 10% of the index. It's maybe not that big tech. So it seems to be a much fairer representation if you're after global diversification, leaning into the quality factor. But many of these products, just the same as every other ETF we've looked at, do come with fees, and even though they might seem small, over time these matter way more than people realize. Let me show you the breakdown. A hypothetical investment of £100,000 based on a 30-year horizon at a historical real return of 7.4%. And what this shows you is how you could end up paying over £100 grand more in fees if you invest in these supposedly low-cost ETFs, even with an assumed fee of 0.22%, you can see how the growth that would otherwise without fees end up at £850k in real terms, which is not shabby, would actually finish at about £700k. So you've lost £150,000 in fees to this thing that seemingly had no platform fee, had no dealing charges, and a small fee of just 0.22% per year. Over 30 years, you're going to get crushed. And one of the reasons for this is that Hargreaves Lansdown, as well as many other providers, have their own fees inbuilt, and they're different according to what you're holding. In some cases, they're capped at £200, which is the case with ETFs and shares. But otherwise, these fees are charged at about half of 1% on top of anything that you would be otherwise paying to the underlying fund manager. So picking stocks could end up saving you over £100,000 in real terms after inflation, what you can actually eat and spend on heating when you're an old biddy, or maybe traveling the world if you're a slightly more affluent biddy. Nonetheless, We're all going to be biddies. So now that we've identified these hidden costs that frankly the passive investing crowd and ETF heads are all missing, I want us to now look at how you actually build a portfolio of single stocks without worrying about buying the wrong companies, which is usually what's holding people back. So you'll very often hear online that stock picking is risky, nobody can beat the market, 94% of professionals fail to beat the market over a 20-year period. And it's very often these same people that are paying £500 a month into the MSCI World, they seem to take the moral high ground without necessarily having any professional credentials. I had to pick stocks as an active manager and outperform the benchmark. So let me show you how it works. I've built this model according to 7 factors that I use to determine quality stocks. Not only quality stocks but good ones as well, great ones within that, that have real boyfriend material, however we'd say, marriage material, the ones that I want to put in my portfolio and keep for life. And you can see how this compares to the S&P 500 in white for each of these metrics. So you can see very quickly and easily at a glance that Meta is an eligible bachelor. Now what this does behind the scenes is run all of the numbers. If you wanted to print out these charts, it will do. But essentially it scores and ranks according to these 7 parameters all of the stocks in the MSCI World universe and a little bit beyond that. So it's really simple to use. You can prompt it in the same way as GPT and say, okay, give me the top 20 stocks. And of course it's according to the model. Or you could say, I'm worried about the sell America theme. I'm worried about potentially weaker dollar. And what inflation could mean for specific sectors, perhaps the threat of higher yields and what any of this could mean for the stock market. You could simply screenshot an article that you've read, drop it in there and say, what do I do with this? And whilst it's not going to give you advice, it's going to help you to figure out what you should be looking to do research in and within your portfolio, what might be vulnerable or what could be a great opportunity as these themes play out. So it makes it simple. Now, if you want to have a preview of some of the companies that are the leaders in each of these 7 categories that I look at here, I've actually put together a report which you can get. I'll leave a link in the description, completely free, which provides an example of these. Now, of course, past performance is not a predictor of future results, and this is for educational informational purposes only. You can see how historically the top-ranking stocks according to my model would have fared compared to the benchmark, which of course is all US. This is global and without any fund management fees. Now, if you want to see exactly how to build your own stock portfolio so that you don't get screwed over by the likes of BlackRock, then watch this next video, which takes you through the exact step-by-step process that helped me make over half a million quid in my pension last year.