[danhak]

Of course a country’s stock market will perform well as that country ascends to become the world’s dominant superpower.

The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150.

To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior.

[gumby]

Who cares about returns over the next 150 years? Even half that is excessive. Someone investing at age 18 might care about the subsequent 50 years.

It's going to be a long time before some other country takes over the "reserve currency/investment market of last resort" position the US currently has. No other market is even close to providing the deep liquidity and rule of law the US market has over a wide variety of instruments.

Sure, someone will eventually take over that role, but there are no candidates today. And, to your point: it was clear by the late 19th century that the US dollar would displace Sterling, but it took another half a century for that to happen. On the scale of current human lifespan, you can assume it won't happen at all.

[ganonm]

Keep in mind that the present value depends somewhat on the discounted future earnings, which by definition extends to the end of time. That being said, the associated time discounting heavily reduces the impact of earnings envisaged say 100 years from now (a 5% discount rate would mean ~13k USD in 100 years is worth about 100 USD now, and that's probably generous given historic market returns).

So, the US doing extremely well 100 years from now vs. the US doing very badly 100 years from now could have a non-trivial impact on the perceived value of US assets. I suspect that the large uncertainty about what the world will look like in 100 years means there is just some sort of seldom changing value baked into assets to account for this, but it nonetheless exists, and could change if there was some huge geopolitical shift.

And before you mention anyone on earth would be dead in 150 years, yes that's true, however you can always sell it to someone later on who will be alive in 150 years (or sell it to someone who can later sell it to someone etc. etc.).

[dalbasal]

Why is "reserve currency" the central issue?

Also, the US stock market, US Dollar and US economy/gdp aren't hard linked to one another these days. The companies listed can be selling to non US markets, employing internationally, founded internationally. They're just listing on the US stock market because well.. that's where the stock market is. The US could, in theory, become more or less popular a stock market regardless of its currency's popularity.

Meanwhile, both the Euro and RMB have similar size markets backing their currency. Neither one is currently trying to displace the USD. I think the importance of owning the international currency is somewhat speculative.

[time_to_smile]

Or we see a contraction in globalization in general in which all economies shrink.

It's entirely reasonable that we could enter a period of long, slow decline across the board. Especially as we continue to push the limits of natural resources and global supply chains.

For example suppose the US continues to move its push to return chip manufacturing to the US. This might mean both that US chip manufactures have a more healthy future than other more fragile tech companies and that they shrink in size. We could see a return of manufacturing to the US which leads to continued employment in US labor for while also meaning that labor force gets paid much less.

We're already starting to see evidence of this happening.

The concerning thing is that I'm not at all sure that our incredibly debt dependent global economy, which assumes future growth, can really handle a gradual contraction to a more sustainable economic structure.

Either way, assuming up is the only way for the market to go is a very naive assumption, but one nobody is happy questioning.

[MuffinFlavored]

> Someone investing at age 18 might care about the subsequent 50 years.

With a gradual decline in exposure to equities over time.

https://www.google.com/search?q=what+asset+allocation+should...

[roenxi]

1. After what happened to Russia every planner in China has "the US government seizes our assets" as a plausible in the next 50 years.

2. It is implausible that the US will ever pay back its foreign debts in real terms. Anyone who lends to them will end up with less stuff in total.

3. We live in an age of computers and pervasive digital communication; things can happen a lot more quickly these days than in the 50s.

4. There is a consistent trend of dropping energy security in Western countries.

This is no time to be forecasting assuming things will happen at a comfortable pace. People should have contingencies ready in case something unprecedented happens. It is tense out there.

[hammock]

100-year bond spot rate: https://alfred.stlouisfed.org/series?seid=HQMCB100YR&utm_sou...

[itsoktocry]

>Someone investing at age 18 might care about the subsequent 50 years

Those 50 years are part of the next 150, and are no easier to forecast. Most market projections are for numbers ~7% annually, but periods worse than that would drastically alter investing plans, and hence social infrastructure planning.

[zie]

> Someone investing at age 18 might care about the subsequent 50 years.

I get what you are saying, but your math here is a bit off.

50+18 = 68.

People generally can live longer than 68 years old, If we go out on longevity and assume people can live to 100 or 120, then it's more like 100 years.

Your next thought is, but people will retire before/around 68, fair enough, but they stay invested generally the entire rest of their lives.

So if the US dominance ends in the next 100 years, then today's teenagers might need to care about it. People in their 30's or 40's probably don't though.

The next 150 years, you are right todays teenagers might not need to care, unless many/all of our aspirational longer living goals happen.

[Spooky23]

It should give pause to people who think that the stock market is some sort of science. Macroeconomic conditions and policy influence this stuff.

[newyankee]

My understanding is that development in some modern areas is exponential. This is the reason why China grew so fast. So a case could be made for faster timelines. US may not slow considerably but it will stop leading and being the only one.

[kingkawn]

Your assumptions presume that the pace of historical developments is the same as it was in the late 19th century, which seems clearly untrue. The rate that these things transform today may be breathtaking.

[acchow]

How can anyone assume the next 30-50 years of the US economy will be anything like its rise to superpower over the last 150 years.

[rsync]

"The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150."

No, I think the question is more subtle ...

Will the relative power and influence of the US grow similarly.

... and I think that may be a very good bet.

The three closest "competitors" - the Eurozone, China and Japan - are, in their own unique ways, dysfunctional basket cases:

Europe's northern savers and taxpayers have to pay for southern workers to retire at 60 ... and southern workers need to eat benefit losses to avoid further (br)exits. This is a not-insignificant economic and cultural mismatch and the results of even minor adjustments are riots in the streets[1] ... or boring, orderly referenda[2].

It is unknown whether the CCP can survive any meaningful slowdown in growth and whether much of the growth of the last 10-15 years (enormous empty cities) was substantive or useful at all.

Japan is undergoing civilizational and cultural collapse.

So ... while there is much dysfunction - both economically and politically - in the United States, it is an enormous, resource rich country that can exist wholly independently from the rest of the world.

It also enjoys absolute control of the worlds oceans and brutally dictates economic and geo politics[3].

In a world of troubled and fraught investments, the US is probably the least troubled and fraught.

[1] https://en.wikipedia.org/wiki/Yellow_vests_protests

[2] https://en.wikipedia.org/wiki/Dutch_withdrawal_from_the_Euro...

[3] https://en.wikipedia.org/wiki/2022_Nord_Stream_pipeline_sabo...

[bwanab]

For a civilizational basket case, Japan's GDP/capita has held up pretty well. Their industrial output is very strong for a country with sparse internal resources.

Europe's problems are not unlike the U.S. internal problems where the tech and financial centers mainly on the coasts subsidize the rest of the country. The difference of course is that the states of the EU can exit, where the American states cannot. I'm not sure which situation is preferable.

China is a black box, but so far recent history has indicated the populace will go along with a lot of pain to avoid chaos.

[dirtyid]

>may be a very good bet

Trend last few years is PRC closing gap and approaching parity in indicators like GDP (already exceeded by PPP), % of global gdp / trade, science and innovation indexes, value chain upgrades etc. Even PRC military development and diplomacy is sufficient to get countries hedge / not commit to US alignment, which was unthinkable 10+ years ago. IMO US will find it difficult to maintain relative "lead" when, in the words of state department, "China is the only country with the economic, diplomatic, military, and technological power to seriously challenge" US order. That said, I think US has headroom via dictating economic and geopolitics within her relatively wealthy bloc and grow at the expense of others.

>It is unknown whether the CCP can survive any meaningful slowdown in growth and whether much of the growth of the last 10-15 years (enormous empty cities) was substantive or useful at all.

Western fixation with PRC real estate waste as proxy indicator of China (econ) collapse is particularly stupid. It's like suggesting US who spends ~20% of GDP on healthcare (approximately PRC real estate) with suboptimal result is spinning development wheels. Same with PRC wasting a few trillion in suboptimal real estate when significant (majority) resources being invested to bring up other (above) indictators that has substantively contributed more to PRC "comprehensive national power". Like US isn't initiating unprecented PRC containment policies because of a bunch of empty of housing units.

[DiogenesKynikos]

> whether much of the growth of the last 10-15 years (enormous empty cities) was substantive or useful at all.

I don't think anyone who has seen the development in China over the last 10-15 years first-hand would say this.

There has been massive development in nearly every area, both in quantity and quality. Just to give one example, anyone who follows the scientific literature in just about any field will be aware of the massive increase in high-quality publications coming out of China over the last decade.

There are one or two examples of "ghost cities" (though most supposed "ghost cities" actually become populated over time), but that doesn't negate the massive, real development that is visible everywhere in China.

[dmarucco]

Are you sure that southern workers retires at 60? I don't think so ...

[was_a_dev]

The French rioting is just another Tuesday.

[malandrew]

China is also expected to see population collapse. They are rapidly aging and there’s no sign that that is reversing.

[acchow]

> Japan is undergoing civilizational and cultural collapse.

Certainly doesn't seem this way when you visit Japan. Sure, they haven't experienced wildly growing excessive consumption like some American states in the past couple decades, but their society is far from undergoing any sort of collapse.

[pedrosorio]

> Europe's northern savers and taxpayers have to pay for southern workers to retire at 60

Using the yellow vests as representative of "southern workers" makes me doubt how well you've researched this answer. Paris is hardly in "southern Europe", and the rest of the southern European countries have retirement ages comparable to those of the "northern savers".

[vl]

([3] link)

Are you implying that US sabotaged Nord Stream?

[nscalf]

More interesting that power and influence, which is an open question, is demographics. There is little to be done about shifting world demographics. Even if the us stays the premier world superpower, can that offset massive declines in the amount of people producing and consuming everywhere? While the us may actually be okay with shifting demographics (Zeihan has some interesting stuff on this), most major economies are facing rapidly declining populations over the next couple of decades.

[toomuchtodo]

Underrated comment. You can’t print human capital, and if fertility rates are declining everywhere, every nation is competing for a shrinking young, productive talent pool.

[warinukraine]

> There is little to be done about shifting world demographics

Hmmmm immigration. That's how fast growing powers have always done it.

[vl]

I’m actually not concerned about demographics. With coming automations and workforce becoming irrelevant societal changes are going to be so tremendous, that age of the population is not going to matter.

[getToTheChopin]

Fair point. To add some context though, this data is based on the returns of the S&P500 index.

Companies in the S&P500 index are based in the U.S., but most of them earn revenues internationally as well.

"Roughly 40% of S&P 500 revenues are generated outside of the U.S., and about 58% of Information Technology company sales were sourced from abroad."

Source: https://www.globalxetfs.com/sector-views-sp-500-sensitivity-...

So, the performance of the U.S. stock market in the next 150 years will not rely solely on U.S. specific economic growth.

[MuffinFlavored]

I've always wondered, why do American investors get to benefit from companies like Apple? Why does Apple choose to be a U.S. company? We're obviously in competition with other countries globally in terms of getting companies like Apple to give us their tax dollars.

I know Apple does this https://en.wikipedia.org/wiki/Double_Irish_arrangement#:~:te....

I just wonder, can they really not find a more favorable country to route the gross of their revenue through?

[ptr]

Nominal Swedish stock market return 1879-2012: 10.9% arithmetic mean, 9.0% geometric mean. Real return: 7.9%/6.1%. And Sweden isn’t really the world’s dominant superpower. https://www.riksbank.se/globalassets/media/forskning/monetar...

[jltsiren]

Sweden, Switzerland, and the US are obvious outliers. Their economies have been abnormally stable, because they have not faced revolutions, civil wars, foreign occupations, and other forms of widespread destruction in a long time.

[paulpauper]

The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150.

It does not need to . What matters is how much profits large companies are earning. There is no indication that profits are slowing. Even if GDP only grows at 2%/year, if multinationals generate 10% annual profit margins, that is $ that must still go to investors even if GDP growth is much lower.

When you compare foreign markets to the US, the US still comes out ahead by almost every metric. There is little indication to suggest this will change. Every problem that the US has, other countries have worse. So relatively speaking ,the US still will be ahead.

[ketralnis]

> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150.

I don't think that's required. Most of these analyses use US stock data because it's so easy to gather compared to international data. The do trends hold internationally, but the magnitudes are reduced. So if you think the US will regress closer to the international mean (and I'd agree) then you can use things like the shape of the bell curve, just not the height. And indeed, this bears out if you look at the markets of the UK or most of the EU. Pretty much any reputable adviser will tell you that that's the consensus, that future returns will probably be lower for the next few decades than they were for the last few. (Usually you see this in the media amplified to a more ridiculous version but that's modern clickbait reporting for you.)

There are other possibilities like we could stagnate for 3 decades like Japan. But yes, that's investing, that's the nature of the bets you're taking.

I'm having trouble finding the quotes but around the turn of last century British economists were looking at the US's explosive economic growth compared to the UK and attributed it to the US having the equivalent of a sudden injection of capital in the form of a whole continent full of free real estate. That is, they reasoned that the UK's growth was limited to what they could do on their existing, mostly already owned and developed land but the US had more physical space for the balloon to expand into. They reasoned that soon that would happen though and the US would grow to fill that space and eventually its economic growth would slow down closer to the UK's. That clearly didn't happen then. I don't think the lesson is the US is exceptional and will continue to outpace the world forever, but I do think that a lesson is that predicting this stuff is hard and reasonable-sounding ad hoc hypothesis don't always bear out.

[nemo44x]

> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150.

Over the next 150 years I have no idea. But over the next 30-50 then almost certainly. No other country is even close and most seem quite comfortable with the global state of affairs all things considered. USA hegemony has created a stable world where the vast majority of people are far better off than their ancestors. It isn't perfect of course but there's no reason to think anyone else would do better. Especially when compared to the previous tenant, Europe.

[layer8]

Just invest in a world index. See for example https://curvo.eu/backtest/portfolio/msci-world--NoIgsgygwgkg... —> minimum investment horizon.

Of course the whole world could go into a multi-decades-long recession, but then we’ll have much more serious problems anyway.

[Negitivefrags]

I always hate this “If it doesn’t work we have much more serious problems” attitude.

If the world did go into a multi-decade recession, what “more serious” problems would you have then your investments doing poorly?

You might answer things like “ buying food due to shortages” or something, but surely whatever problem you name, being more rich is going to solve it?

Now you can invest on the thesis that this isn’t going to happen, but to argue that the whole concept of investment is useless if it does seems very suspect to me.

[purpleblue]

If everyone is in a recession, then no one is in a recession.

[mypastself]

Therefore investing mechanically in the whole world might be a safer bet. Other than currency risk, home bias investment never felt like the optimal approach to me, even if your home is the world’s most powerful economy.

[lastofus]

> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150.

> To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior.

This is why it's suggested that unthinking mechanical investors invest globally, not just in the US. For example, VT, a single set and forget index fund has 40% international exposure. That's to speak nothing of the S&P 500 companies that do business internationally.

https://www.morningstar.com/etfs/arcx/vt/portfolio

[nimz]

Your point is valid - we shouldn't take single-country risk in investing. Assuming you believe the world as a whole will get more productive and value creating, globally diversifying your stocks is the answer.

As an example that supports your point, the Japan stock market (Nikkei) peaked in 1989 and STILL has not returned to that high.

However, even if you were incredible unlucky and had bought in at the 1989 peak in Japan, if you had an internationally diversified portfolio, you would be OK. E.g. a 30/30/20/20 Jp Stocks/Intl Stocks/Jp Bonds/Intl Bonds portfolio purchased in 1989 at the Nikkei peak would have more than doubled by 2014 (see here: https://www.bogleheads.org/forum/viewtopic.php?t=265807 and also https://www.afrugaldoctor.com/home/japans-lost-decades-30-ye...).

[paganel]

> Nikkei) peaked in 1989 and STILL has not returned to that high.

Also, the FTSE 100 has been almost flat since the financial crisis, so basically just a little over 10 years. It was at about 6300 in the first half of 2013, it's at ~7700 now, a ~22% return over 10 years is nothing to write home about. For comparison the SP500 was at ~2300 in the first half of 2013 vs ~3800 now, a 66% return. And that's after last year's 23% decline.

[ar_lan]

If you continued to invest in Japan throughout that period after, you'd be up today. The only case you were forever screwed is if you really aren't pouring more money into that (e.g. retirement).

[hammock]

I think about this a lot when you consider the world's largest companies today aren't stocks but sovereign wealth funds and oil reserves. Similarly in days past they were other state-owned entities like the East India Company.

The S&P 500 is not everything there is to be had...

[FatActor]

A long time ago, naive me learned that tech companies also invest their money and that those returns count toward their valuation, and that seems wildly backwards to me, but I'm an engineer, not a financial expert.

[pacetherace]

I find the inflation as a variable very interesting. Countries that don't have strong economies generally tend to have higher inflation. So we may continue to see the stock market continue to rise indirectly due to inflation but the net return would be much lower.

[dpweb]

You can only evaluate returns compared to the risk-free return (ie treasuries) - and favor treasuries cause less variance.

Stock market success depends entirely on when in history you got in and got out. When it comes to US dominance over the next century - who knows. I do trust in Fed interventionism and willingness to print money - so that certainly favors stock market investment.

Personally I find stock market is too high a variance and I prefer not speculate with money I can't afford to lose.

Buffet himself said their biggest peak to trough was 50%. Fine if you're already rich and investing a fund. Not so great if it's kiddos college money.

[huijzer]

> Of course a country’s stock market will perform well as that country ascends to become the world’s dominant superpower.

There is probably more at play too. The number of banks, for example, has been declining steadily over time [1] as has the internet allowed single corporations connect to more buyers (nationally and internationally). Just think of all the local stores that Amazon has displaced.

[1]: https://www.stlouisfed.org/on-the-economy/2021/december/stea...

[TheFreim]

> To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior.

If things go badly then the money I would have from not investing "mechanically" would probably be as useless as the investments. If everything is going to decline continually it seems the greater reward will almost always be in the investment. This also assumes you only invest in the current world superpower, seeking global diversification would probably be wise if you see a major change in polarity.

[dionidium]

Rumors of our impending collapse have been, let's say, exaggerated. I wouldn't bet against the United States over the next 30-50 years, at least.

[bionsystem]

It's too hard to swallow for most people but you're right. There are significant headwinds coming ahead for most markets whilst productivity gains have stalled. See Robert J. Gordon's paper "IS U.S. ECONOMIC GROWTH OVER? FALTERING INNOVATION CONFRONTS THE SIX HEADWINDS".

I really think millenials should consider hedging their bet, maybe even spend 100% of their income.

[Thorrez]

How would spending 100% of their income be hedging their bet?

[wintogreen74]

>> To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior.

Maybe, but this describes the investment strategy of pretty much every index-based fund and they've been the big winners over a long time frame. Why do you care what happens to a market 100+ or even 50 years from now?

[zitterbewegung]

I don’t think we were much of a dominant superpower until after World War 2. Lots of Europe was decimated but our infrastructure wasn’t and we also won the Cold War . We had large factories created also.

If some other superpower does come around you could just try to find a foreign index fund and adjust your investments.

[rr888]

Along with a 50 year bull market in bonds where yields have dropped nearly every year (along with inflation).

[FooBarBizBazz]

It's weird how most of the return from bonds comes not from yield but from capital appreciation [1], which happens because yields are dropping. There's something perverse and circular about it: "Make sure you buy your collectible widget today! It'll go up in value, because next year's widgets won't be as good! Prices only go up, because everything's downhill from here!"

[1] Actually, is this literally true?

[refurb]

I’d argue the average person’s investing window is more like 30-40 years, not 150.

And even then, you don’t have to be the dominant superpower to see a rising stock market. Plenty of examples of smaller countries who have seen substantial market gains.

[guidedlight]

Agreed. At the turn of the century, Argentina was a similarly prosperous country to the United States.

I’m sure given an investment in Argentina’s stock market in 1900, it would have now been lost many times over.

[dangus]

I would argue that borders are irrelevant. Large multinational companies generally list on US stock exchanges.

For example, Spotify is a Swedish company listed on the NYSE.

[snowwrestler]

This has the causality backward.

The qualities of the U.S. that helped it become a superpower, also help it have a high-performing domestic economy.

[catskul2]

I get what you're saying about "mechanically" but "cargo cult" does not work as an analogy here.

[WeylandYutani]

Smart people invest globally. I have no illusions that American billionaires care about borders or governments.

[radiator]

Actually it looks like the US is already on the way of demotion from a global superpower to a regional power. There is no single country which comes as a replacement, but a multipolar world order instead. Many countries, mostly asian are emerging.