‘The mother of all bubbles’ in the US is sucking money away from the rest of the world, market expert says

U.S. dominance over global financial markets has reached extreme levels, pointing to a bubble of epic proportions, according to Ruchir Sharma, chair of Rockefeller International.

In a column in the Financial Times last week, the market expert said investors around the world are putting more money in a single country than ever before.

“Awe of ‘American exceptionalism’ in markets has now gone too far,” Sharma, who authored the recent book What Went Wrong With Capitalism, warned.

For example, U.S. companies now account for 70% of the leading global stock index, up from 30% in the 1980s, while the U.S. economy’s share of global GDP is just 27%, he noted.

To be sure, U.S. growth has been more robust than elsewhere lately, and American companies are among the most profitable. But Sharma pointed to other metrics that indicate how out of whack markets have become, even after factoring out the AI boom that has sent a handful of U.S. tech stocks to stratospheric levels.

Indices that weight stocks by price instead of market cap and adjust for the leading tech giants show that the U.S. has outperformed the rest of the world by more than 4-to-1 since 2009, he explained.

And such outperformance isn’t restricted to stocks either. In 2024 alone, $1 trillion in foreign capital has poured into U.S. debt markets, nearly double what the eurozone has attracted. And America controls more than 70% of the global market for private equity and credit.

“In the past, including the roaring 1920s and the dotcom era, a rising US market would lift other markets,” Sharma wrote. “Today, a booming US market is sucking money out of the others.”

A mania in market sentiment can impact the real economy, he warned. For instance, investors abandoning smaller markets can weaken currencies and force central banks to hike rates—slowing those economies and worsening their fundamentals.

“Talk of bubbles in tech or AI, or in investment strategies focused on growth and momentum, obscures the mother of all bubbles in US markets,” Sharma added. “Thoroughly dominating the mind space of global investors, America is over-owned, overvalued and overhyped to a degree never seen before.”

His admonition echoes what Allianz chief economic advisor Mohamed El-Erian said last month, when he told Bloomberg TV to expect a “huge sucking sound” of foreign capital flooding into the U.S.

The rest of the world may have more trouble coping with a period of faster growth and hotter inflation, adding to America’s relative edge, he predicted.