American exceptionalism is alive and well among global investors, attracted by U.S. companies’ global reach and technological innovation — but is this a bubble about to burst?

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The U.S. makes up 70% of the leading global stock index, the MSCI World Index, up from 30% in the 1980s, notes an editorial in The Financial Times. This far exceeds the United States’ 27% share of the world economy.

Further, the dollar is at its highest value since developed nations abandoned fixed exchange rates 50 years ago.

“This is not a bubble in U.S. markets — it’s a mania in global markets,” writes author Ruchir Sharma, head of Rockefeller Capital Management's international business. “Nor is this just AI mania by a new name.”

True, Sharma concedes, U.S. earnings vastly outpace the rest of the world.  The U.S. has outperformed profits at foreign companies by more than four to one since 2009 in indices which weight stocks equally regardless of size, and which correct for the domination of Big Tech.

This is why the U.S. is drawing 70% of the $13 trillion global market investing in private equity and credit, and why foreigners have placed $1 trillion in U.S. debt so far in 2024.

This movement of money from international markets into the U.S. is somewhat of a self-fulfilling prophecy in America’s favor, as it puts capital to work in the U.S. and weakens economic fundamentals overseas.

With the election of Donald Trump as president of the United States, smart money is already being drawn all the more to markets under his leadership, to be punctuated by higher tariffs, lower taxes and fewer regulations — all of which could boost markets even further.

Bubbles emerge when everything seems too good to be true, which, Sharma senses, is the case with U.S. stock market mania today.

“America is over-owned, overvalued and overhyped to a degree never seen before,” Sharma writes. “As with all bubbles, it is hard to know when this one will deflate.”

Referring to stocks’ current 26 price/earnings ratio compared to their historical 15 P/E, Sharma fully believes the bursting of the U.S. stock market bubble is bound to happen.

Could it be like the end of the Roaring 1920s or the Dot-com era?

That, the author maintains, is not the main question. The real question is when the blow-up will happen.