By By The Newsroom

Copyright scotsman

I was in US earlier this month and – although I was at a financial services conference, rather than on a reciprocal state visit – the special relationship was very much on my mind. British and American financial advisers have more in common than divides us – we work to get the best outcomes for our clients, we operate within strong and relatively agile regulatory frameworks, and we prize technological innovation. It was good to take a look into a world that was just a little bit different. Everything seems shiny and new in the California sunshine. There was a lot of American confidence and positivity in the air. It was energising to hear new ideas, to explore new tech firms, hear about AI tools that save time and improve compliance. To think about how to make advice more transparent, personal and efficient. All in all, it was a good conference. But what led me to ponder that special relationship more deeply and ask, where are our points of difference? A theme of my chats with my transatlantic counterparts was the proportion of US equities held in portfolios on each side of the Atlantic. Most UK portfolios typically allocate 55 to 65 per cent of their equity investments to US stocks. This is reasonable, given than that the US accounts for approximately 60 to 70 per cent of global market capitalisation. The remainder of that equity allocation is spread across Europe, emerging markets and other developed nations. But in conversation with US asset managers, I discovered that they routinely hold 80 to 90 per cent of their equity portfolios in US stocks alone. Some even confessed to higher percentages. When I pressed harder about the reasons why, I was told that this was simply giving clients what they asked for.In the UK, this would be considered unorthodox –our collective wisdom has coalesced around diversification and minimising concentration risk. Overexposure to a single market – no matter how large or successful – increases vulnerability to country-specific economic downturns, regulatory changes, or unforeseen shocks. Is this exceptional position confidence, over-confidence, or even – as one conference delegate suggested – hubris? Certainly, US equities are high quality and there is always reduced currency risk in your home market. The S&P 500 has outperformed international markets for over a decade. You could also say that there is no reason for US investors to dilute with overseas investments as they get international exposure through the global reach of their multinationals – most especially their tech giants. Is this dominance just a fact of life or is it taken for granted? On this side of the pond, there is ongoing debate about whether US market dominance is sustainable in the long term. We view American market leadership as cyclical rather than permanent, and diversification is seen as prudent risk management rather than performance dilution. The question isn’t whether US markets are exceptional –which they clearly are, especially at the moment. The question is whether that exceptionalism justifies the level of concentration I observed, and whether such concentration reflects rigorous analysis or comfortable assumption. After Trump’s tariff shocks, US markets hit a high in July but global markets have also seen gains, showing that diversification has paid off for those who embraced it.Europe remains the undisputed leader of 2025 so far, supported by increased governmental spending and attractively priced shares. Even the UK stock market –long-maligned for its lack of technology companies, and its concentration in old world sectors such as oil and gas, energy, mining, and banking – delivered a healthy double-digit gain. Although market advances have been healthy across the board, bumps should always be expected in the road ahead. The UK-US difference in mindset is crucial. It shapes how we construct our respective portfolios, and it shapes the risks investors are willing to accept. Here’s what we do differently at Calton – we challenge consensus rather than blindly following it. We use and build portfolios with a truly global perspective, avoiding national biases. We keep allocations close(r) to global market weights to minimise unintended risks.What’s the outcome? Portfolios that are more resilient to shocks and better positioned for sustainable, long-term growth. True diversification isn’t about chasing past winners, it’s about preparing for the uncertainties ahead. So, how much US exposure is too much? It depends on your investment goals, risk tolerance, and your portfolio mix. But leaning heavily on one market, even the US, is a risk worth reconsidering. Find out more here