Indexy a trhy
Why the US Dominates Global Indices and What That Means for Your Portfolio
Key takeaways
- The US accounts for 60–70% of MSCI World and over 60% of FTSE All-World — this dominance reflects actual market capitalisation, not a deliberate tilt.
- American technology companies grew significantly faster than the rest of the world over the past decade, thereby increasing their share in indices.
- High US weighting introduces currency risk: a weakening of the dollar against the Czech crown or euro reduces the return for a Czech investor.
- Concentration in the US is not necessarily a mistake, but a conscious addition of European or emerging markets exposure can modestly reduce dependence on a single economy.
The US accounts for approximately 60–70% of market capitalisation in global equity indices — and this dominance is not the result of a deliberate overweight, but simply a reflection of where the world's largest and most valuable companies are located.
Why the US is so large in indices
Equity indices weight companies by market capitalisation. A company is worth as much as investors are willing to pay for its future profits. American companies — especially in technology — have managed to build global businesses with enormous margins. Apple, Microsoft, Nvidia, Alphabet, and Amazon are global monopolies or duopolies in their respective categories.
The result: there is more value in the S&P 500 than in all European indices combined. And a global index simply reflects that reality.
Historical dominance and its possible ends
This is not a law of nature. In the 1980s and 1990s Japan dominated — and then came the lost decade. Around the turn of the millennium people were talking about Europe's rise. Historical cycles show that regional dominance shifts. The US weighting in indices is historically high today — that does not mean a correction is coming, but it is information worth noting.
What this means for your portfolio
- A global ETF automatically overweights the US — consciously or not
- Adding a European or emerging markets ETF modestly reduces dependence on the US
- The S&P 500 alone is a pure bet on the US — pros and cons alike
How to think about a global versus an American portfolio is shown in the All-World vs. S&P 500 comparison. How to build a first portfolio with sensible geographic diversification is explained in the first portfolio guide.
FAQ
Why does the US have such a large weight in MSCI World?
Because American companies have the largest market capitalisation in the world. Indices weight companies by market value — and that is dominated by the US, especially due to technology giants such as Apple, Microsoft, and Nvidia.
Is concentration in the US a risk?
It is a conscious choice, not a mistake. Historically it has worked well. But dominance can shift — Japan was once dominant too. Adding other regions to a portfolio reduces dependence on a single economy.
How does the dollar exchange rate affect a Czech investor's return?
Significantly. US equities are in dollars. If the dollar weakens against the crown, your euro or crown-denominated return falls. Over the past 20 years the dollar has roughly stagnated against the crown, but the swings are large.
Should I buy the S&P 500 or a global index instead?
The S&P 500 gives full exposure to the US; a global index adds Japan, Europe, and emerging markets. From a diversification standpoint the global index is theoretically better — in practice it depends on your view of the American market.