For UK investors, being overweight US equities has been one of the most rewarding investment decisions of the past decade and a half. Since the Global Financial Crisis, American stock markets have consistently outperformed most other developed and emerging markets, driven by world-leading technology companies, a dynamic corporate sector, and an unrivalled ability to attract global capital.

The US has not just been the world's largest economy; it has become the world's premier destination for investment. Global savings have flowed into American equities and bonds almost by default, supporting valuations and reinforcing the country's economic strength. For UK investors, this has created a powerful tailwind. Exposure to the US has delivered superior returns compared with Europe, Japan, China, and most emerging markets, while the dominance of companies such as Microsoft, Apple, Nvidia, Alphabet and Amazon has made it increasingly difficult to justify being underweight.

However, the environment that supported this exceptional period of US outperformance is beginning to change.

The foundations of American market leadership remain formidable. The US still benefits from world-class universities, deep capital markets, strong legal protections, abundant energy resources, favourable demographics relative to many developed economies, and a vast domestic consumer market. These advantages are unlikely to disappear, regardless of the political backdrop.

Yet investors are becoming increasingly concerned about the fiscal direction of the United States under President Trump. Large and persistent government deficits, coupled with limited political appetite for fiscal discipline, are starting to raise questions about the long-term sustainability of US debt. Bond markets have taken notice, with Treasury yields (US Government debt) remaining elevated as investors demand greater compensation for holding this government debt.

This matters because rising bond yields have implications well beyond fixed income markets. Higher government borrowing costs feed through to corporate borrowing costs and increase the discount rate applied to future earnings. For a market dominated by expensive growth and technology companies, that can create a significant valuation headwind.

At the same time, enthusiasm around artificial intelligence, which has been a major driver of US market returns in recent years, is becoming more nuanced. Investors remain convinced of AI's long-term potential, but expectations are now extraordinarily high and valuations reflect much of that optimism. The market is no longer being lifted by an indiscriminate rush into anything AI-related.

From a UK investor's perspective, the key point is that while the case for owning US equities remains strong, the argument for being overweight the US is becoming less clear-cut.

Elsewhere, opportunities have emerged. European corporate earnings are improving, supported by more attractive starting valuations. Japan continues to make progress on corporate governance reforms and shareholder returns. Across parts of the emerging world, fiscal positions are healthier than they have been for many years. Relative valuation gaps between the US and the rest of the world remain historically wide, creating scope for international markets to narrow the performance differential.

This does not suggest an exodus from US assets. America remains too large, innovative, and financially important for that. Nor does it imply that US equities are destined to underperform. Rather, it suggests that the exceptional period in which US markets consistently outpaced the rest of the world may be moving into a more balanced phase.

We have always backed diversified portfolios and as I have written in previous weeks and months, our investment team have been carefully managing our US equity exposure and doing the heavy lifting for our clients, and it has been pleasing to see strong performance on the back of this. The US should remain a core holding, but diversification beyond America has become increasingly valuable as US fiscal risks rise, valuations remain stretched and attractive opportunities develop elsewhere. In other words, being overweight the US has been the right strategy for much of the last 15 years, but under Trump's fiscal policies and against a backdrop of emerging opportunities abroad, it may no longer be the obvious default position it once was. Do have a good weekend.