Why America’s Bull Market Is Still Running, 250 Years Later

The Declaration of Independence may have been one of history’s most bullish filings.

The US has already begun celebrating the nation’s 250th birthday with Revolutionary War reenactments, big deals at autolots and, of course, a fist fight on the White House lawn. But for advisors and clients, the anniversary is also a chance to reflect on why the US has been one of history’s strongest and most durable investment stories. For much of modern history, America has been the epicenter of global finance. Today, US equities account for roughly two-thirds of global stock market capitalization. While new challenges to growth may arise, America’s national spirit has been one of its most surprising superpowers, said Meb Faber, founder and CIO of Cambria Funds.

“It’s almost like there’s something in the water,” he said. “This country was largely founded by immigrants, risk-takers and people who got on the boat. There’s a freedom to take a risk and fail, and there’s nothing more American than failing.”

The Pursuit of Happiness

Much of America’s success stems from that willingness to embrace risk, he told Advisor Upside. An entrepreneurial culture distinguishes the US from much of Europe and Asia, where startup ecosystems tend to be less prominent. “There’s amazing entrepreneurs all over the world, but America has structures in place to enable it and also get out of its way,” said Faber, who documented America’s economic rise in a new book premiering (you guessed it) July 4. 

Americans also participate in financial markets at far higher rates than many of their developed-market peers. Roughly two-thirds of US households own stocks directly or through retirement accounts, according to Federal Reserve data, compared with about one-third of households in the European Union and fewer than one-quarter in Japan.

Change Is the Only Constant. Still, America’s dominance has not been uninterrupted:

• At the turn of the 20th century, London remained the world’s financial center. 
• Japan briefly overtook the US as the world’s largest stock market during its late-1980s asset bubble.
• China’s equity boom in the mid-2010s briefly threatened to narrow the gap.

“It would be foolish to assume that the US is guaranteed in the future to be No. 1,” Faber said. “It’s the same as if you told someone during the Korean War, ‘Half of your country is going to have a larger stock market than the UK in 2026.’ They’d say you’re crazy.”