Ex-World Bank official warns to diversify away from US markets, people ‘will suffer’
Oxford’s Ian Goldin says extreme concentration of capital in tech giants exposes global investors to a looming and painful valuation reversal
A coordinated push towards global market diversification is urgently needed to shield savers from a potentially dangerous valuation correction in highly concentrated US equities, a former World Bank official has warned.
“The very inflated valuations of companies increasingly biasing the New York Stock Exchange towards a very small group of companies, which under no possible circumstances could be generating revenues commensurate with their valuations, is a worrying trend,” Goldin said at the Sina Finance Global Capital Summit.
He said it was unsurprising to see a recent correction in SpaceX’s valuation, describing it as a predictable consequence of stretched market pricing.
Although the US economy accounts for less than 20 per cent of global gross domestic product, more than 70 per cent of globally listed equities and bonds remain concentrated in US markets, Goldin said, leaving investors with limited opportunities to diversify away from US assets.
People around the world will suffer
If a broad-market correction were to take place, the fallout could not be contained, Goldin warned, adding that the impact would become increasingly global.