the source of S&P profits
A reasonable guess (meaning my guess) is that half the profits of the S&P 500 come from outside the US. Yes, the SEC requires publicly traded companies to disclose in their 10Ks the geographic breakout of their earnings. But this dictum, like the required line of business table, is, as I see it, more honored in the breach than in meaningful disclosure.
Why the need to guess? Two reasons. For competitive reasons, companies are loathe to reveal anything about their inner workings to the outside world, and especially to competitors, who can access the SEC Edgar site as easily as the rest of us. In addition, the availability of tax havens around the world gives firms scope to recognize costs in high-tax countries and associated profits in, say, the Cayman Islands.
The Russell 2000 index of smaller stocks is much more US-centric, with something like 4/5 of its profits derived domestically. So it’s much more a bet on the US economy than of the appeal of US company offerings to a worldwide audience.
a shift in market focus?
My feeling is that one is underway. Year to date, the Russell 2000 is up by about 9%. This compares with +18% for the S&P 500 and +23% for NASDAQ. But the Russell has gained the whole 9% over the past week. This compares with +1% for the S&P and +0.6% for NASDAQ.
Part of this is valuation. Over the past year, NASDAQ is ahead by 31%, the S&P by 25%. In contrast, before last week the Russell 2000 was +6%.
To my mind, individual stock analysis is way more important than index affiliation. But my guess is that there’s still a lot more life in what I’m reading as at the very least a tactical switch away from the past year’s AI-related winners.