Two countries, two very different breakfast loyalties. Vegemite in Australia and peanut butter & jelly in the US. Both have their merits, and preferences come down to taste. But when it comes to building long term wealth, the choice isn’t subjective. For genuine growth in a portfolio, global exposure, particularly US equities, has been nonnegotiable.
Over the past decade, US equities have consistently outperformed Australian shares. The ASX has been dominated by cyclical banks and resources such as CBA and BHP, while US indices have been driven by structural growth leaders like Microsoft, Amazon, and Alphabet.
A tale of two markets
The US market’s outperformance isn’t accidental. It is the product of structural innovation, scale, and global reach.
Mega-cap dominance: The top 10 US stocks in terms of market cap have contributed over 50% of total 2025 returns. While the top 10 ASX 200 stocks contributed just 33%, despite making up a larger share of the index.
Global growth engines: AI, cloud, ecommerce, semiconductors are overwhelmingly led by US firms. The ASX 200 remains concentrated in domestic sectors, especially financials.
Revenue diversification: US companies derive around 50% of revenue from outside the US, compared to c. 35% for ASX firms, whose offshore exposure is heavily skewed toward mining.
Strong fundamentals: Higher ROIC, disciplined capital allocation, and robust cash flow support valuations even when multiples appear elevated.
Meanwhile, the ASX 200’s heavy tilt towards banks and commodities means earnings are more cyclical. These sectors generate cash, but lack the structural growth tailwinds needed to compound returns over time.
Australian companies have also struggled to innovate and penetrate global markets at the same pace as US firms. This has limited earnings diversification and made growth more dependent on commodity cycles.
Why 2026 Favors US Equities
Next year is shaping up to be another risk on environment, with multiple tailwinds favouring US equities:
- AI adoption goes mainstream: In 2026, enterprises move from pilots to production. AI agents, automation, and enterprise AI platforms will start to monetise and improve productivity. Driving revenue and margins.
- Global growth and fiscal support: While inflation and rates remain a concern, accommodative policy and government led capex in the US will support spending and economic growth.
- Platform leadership pays off: US mega caps don’t just innovate, they control the platforms the global economy runs on. From cloud infrastructure to app ecosystems, these companies capture disproportionate profit pools.
- Structural advantages: AI adoption is constrained by compute, power, and talent availability. This protects pricing power and reduces the risk of oversupply.
How to Gain Exposure to US equities
For Australian investors, ASX listed ETFs offer simple and transparent access to the US growth story:
ETFS Magnificent 7 Plus ETF (HUGE): Concentrated exposure to the 10 largest Nasdaq stocks.
ETFS US Technology ETF (WWWW): Broader technology exposure across semiconductors, cloud, networking, and data centre infrastructure.
ETFS US Quality ETF (BEST): Focuses on high quality US companies with strong cashflow and profitability, blending growth with resilience.
Takeaway
In 2026, the US market is set to extend its leadership over the ASX. Mega cap companies will continue to capture the lion’s share of growth. Australian investors looking to potentially grow their portfolio should think less about domestic familiarity, Vegemite, and more about the global growth story that is being driven by the US, Peanut butter & jelly.
Disclaimer:
The issuer of units in ETFS Magnificent 7+ ETF (HUGE) (ARSN: 685 356 183), ETFS US Technology ETF (WWWW) (ARSN: 685 355 971) and ETFS US Quality ETF (BEST) (ARSN: 685 149 464) is the responsible entity of the Fund, being ETF Shares Management Limited (ABN 77 680 639 963, AFSL: 562 766). The product disclosure statement (PDS) for the Fund contains all of the details of the offer of units in the Fund. Copies of the PDS are available from ETF Shares Management Limited or at www.etfshares.com.au. In respect of each retail product, ETFS has prepared a target market determination (TMD) which describes the type of customers who the relevant retail product is likely to be appropriate for. The TMD also specifies distribution conditions and restrictions that will help ensure the relevant product is likely to reach customers in the target market. Each TMD is available at www.etfshares.com.au
The information provided in this document is general in nature only and does not take into account your personal objectives, financial situation or needs. Before acting on any information in this email, you should consider the appropriateness of the of the information having regards to your objectives, financial situation or needs and consider seeking independent financial, legal, tax and other relevant advice.
Investment in any product issued by ETFS are subject to investment risk, including possible delays in repayment and loss of income and principal invested. The value or return of an investment will fluctuate and an investor may lose some or all of their investment. Past performance is not a reliable indicator of future performance
