The value of companies traded on American exchanges is around $62 trillion. This is Wikipedia's latest data. There may be minor errors. Chinese companies barely reach $12 trillion. Japan's is $6.3 trillion. India's is $5.3 trillion. Then there's Hong Kong, which, of course, should be considered part of China, at around $5 trillion. That leaves major industrial countries like Canada, France, the UK, Saudi Arabia, Taiwan, and Germany. Their valuations are roughly at Nvidia's level. In fact, when we get to around $3 trillion, Google has also surpassed $3 trillion. Add Apple and Microsoft to that list. They're also trading at around $3-4 trillion. So how does this happen?

Another striking piece of data is that the American economy accounts for roughly one-fifth of the global economy. Yet, the value of its companies accounts for 52% of the total value of all publicly traded companies worldwide. Yet another striking piece of data. American companies are valued at around 200% of their own economies. In contrast, Chinese companies are valued at only around 62% of their own economies. So how does all this happen? Is the American stock market a massive bubble? Or are there fundamental issues supporting it? Perhaps more importantly, are these fundamental issues weakening? Do we expect significant capital flows from American stock markets to other stock markets? I'll explain all of this for you. Looking at this striking chart sometimes makes me anxious. Let's take a deeper look at this critical issue, which can influence all our investment decisions.

One of the reasons for these massive valuation differences is that the United States has some truly great companies. The companies we call MAG7 are particularly impressive. They know how to innovate technologically, do good marketing, and manage costs effectively. This is why they are incredibly profitable and have incredible growth rates. I want to give you two striking examples. The company that owns Meta, Facebook, and Instagram, currently has a price-to-earnings ratio of 27.69, below 2015 levels. So, at least as of now, it's impossible to talk about a bubble. We can say that the commodity is trading within the general average. When we look at the forward P/E, that is, the forward price-earnings ratio, we see a similar situation. The commodity is trading within its general average. In other words, nothing has changed since 2015. The main reason for this company's increased valuation is its increased profits. Remember, ultimately, company valuations grow in proportion to their profits and free cash flow. America has such a company.

Let me give you another striking example. Nvidia, which has been making waves with its AI chips. It has a valuation of $4 trillion. The naysayers say it's a massive bubble. The stock may lose value in the future. I'm not making any claims about that, but let's see if it truly is a bubble. I'm talking about the company's profit growth, net profit: 29.76 billion in 2024, 72.88 billion in 2025, and 86.597 billion in the last two months. So, what are the company's ratios like? For example, its forward-looking P/E is at historical levels of 31.22, or even slightly below. Looking at the price-earnings ratio for the last 12 months, it's 50.51. This is also close to historical averages. In fact, if we compare it to January 2024, it's significantly cheaper, and remember, looking at the price-earnings figures for this company retrospectively isn't very meaningful. This is because price-earnings increases are incredibly rapid. These annual increases show similar quarter-over-quarter increases. America has companies like this. These companies are pioneers in the technology sector. For example, China still hasn't reached Nvidia's microchip quality.

These companies are very strong in areas like marketing and customer experience. Meta provides a great example of this. This is where some of the valuations come from. It seems that America has been moving very fast in this area, especially since 2007. The Nasdaq index, the index focused on technology companies, is the main difference. So, on the technology front, it started growing much faster after 2007 compared to other global stock markets. Why was 2007 critical? Because, if we set aside Tesla, the giant American companies we call MAG7 today, the year the iPhone was released, all six of them existed because of Apple's iPhone. The number of successful mobile phone manufacturers has increased globally. South Korea and China are among them, but they were very pioneers in this regard. That's why, for example, the income level of iPhone users worldwide is far higher than that of Android users. Because the brand is so well-established, and the mobile and web applications behind it have paved the way for many new startup models and business models, enabling America to grow much faster than other countries.

That's why technology, innovation, and having good companies are so important. But if we shorten the timeframe a bit and look at the last year, the situation becomes a bit more interesting. Here, we see that China has begun to surpass the US. In the last year, the Chinese stock market has performed much better than the US stock market. In fact, even the German stock market is almost neck and neck with the US stock market. Looking back since the beginning of the year, we see that China and Germany have outperformed the US stock market, the Nasdaq. This suggests a trend change. We'll delve into the reasons for this trend change. But if you want to have a valuable stock market, you need to own valuable companies. That's the first point.

Now, you might ask, aren't there such great companies in other countries? Frankly, there aren't many. For example, if you look at the European continent, I can name three companies: ASML, SAP, and Novo Nordisk. Besides these, there aren't many businesses that interest me and that I wonder where this company's technology will go. Now, players like NBIS have started to enter the artificial intelligence game. There are some small individuals, but there's no company in Europe that you could place against Meta, Amazon, Apple, Google, or Tesla. There is one in China, but China has other problems. And that also affects market issues to a certain extent. Let's delve into them now.

Even if your companies perform exceptionally well, if investors aren't interested, their value won't increase. America has a significant advantage in this regard because it has some structural strengths. The first of these is the retirement system. As you know, America has a 401K system. A portion of everyone's money is deducted and accumulated in pension funds, and these pension funds invest heavily in American stocks. Some are even obligated to distribute weighted shares to all companies in that index, without discriminating between companies, through passive index funds. This way, a portion of the total money generated by the American economy automatically goes into stocks. Nowhere else in the world does a 401K system this robust. Therefore, nowhere else in the world is there a system where almost all citizens participate in the stock market. This is America's great strength. They've designed this well; that's where the money goes.

This is also why managers don't allow the American market to fall too much. For example, when another country's stock market crashes, the number of people affected is quite small. However, when the American stock market crashes, a large portion of American citizens experience at least a significant loss of value due to their accumulated retirement accounts, and that government doesn't fare well.

Besides this, American society is also very investment-oriented. I can say that Americans have a very high level of financial literacy. They receive this education from their families from childhood. There are many people around them who have become wealthy through stocks. When retirement accounts and this investment culture combine, a large portion of the money goes into stocks.

A third issue is, of course, that the US currency is still the global reserve currency, and there's been some weakening. As you know, we're seeing a shift towards gold in the recent global trend. The US dollar's reserve currency status is weakening somewhat, but a very large portion of global foreign trade transactions are still conducted in US dollars, and 52% of the world's total reserve currency is still in US dollars. What does this bring? It naturally creates a strong stock market. For example, I hold my money in US dollars. As a global citizen, when I ask where I should invest it, US dollar-denominated stocks seem like a smart move. Because most currencies are losing value against the US dollar. The US dollar is losing value internally. That's a separate issue. But it's a fact. It's still a reserve currency.

A third issue is America's foreign trade deficit. You might ask, America's foreign trade deficit is enormous. What benefit does it have to the stock market? A foreign trade deficit essentially means exporting US dollars to the world. In other words, America is sending capital to the world. It's receiving goods and services in return. What will this outgoing capital do in that country? For many years, it continued to flow into America. Money, especially from countries like China and Japan, flowed into US treasury bonds. Now, that flow has somewhat slowed, due to both the geopolitical situation and fears of America's excessive debt. However, a significant portion of that money is still flowing into stocks, not treasury bonds.

For example, we know there's significant Japanese and Chinese investment in Nvidia. It's such an interesting structure. You export money because you have a current account deficit. Since it's reserve currency, where will the other country store it? They can make their own investments, etc., but if there's still some surplus—and America, being a massive consumer economy, generates significant surplus money worldwide—that money comes back. Some of it is invested in American Treasury bonds at decreasing rates, while some of it is invested in the American stock market.

On the other hand, as an investor, one of the reasons I feel comfortable with the American stock market is that I find its regulations quite strong and transparent, though not 100%. Frankly, there's a lot of fraud there. Everything happens, but it's comparatively small, and then there's the American economic press. So, when you want to learn about a company, there's no data you can't access. Include technical charts, fundamental analysis, and the opinions of other investors. Did the company's employees and executives buy or sell shares? In other words, there's an incredibly dense data flow. This is also one of the factors that makes the American stock market attractive to me. Because they are very wealthy on the American stock market, this attracts people.

On the other hand, interest in the American stock market is increasing because they have well-regulated capital market regulations. In recent years, small investors, in particular, have begun investing significant amounts in the American stock market. In contrast, investing in the Chinese stock market is always a more difficult process. All of my investments in China have been through special securities on American exchanges. In other words, they have special certificates traded there, and they work through them. Direct participation in the Chinese stock market is also very difficult. When we bring all these factors together, the strength of the American stock market becomes clear.

So, will this power collapse? Of course it will. First, if the weakening of the economy and the real economy worsens—as you know, there have been some deteriorations in employment data and production data recently—this will ultimately affect companies, because consumers will begin to become unable to consume. This is a factor. Secondly, there is considerable competition around the global reserve currency issue. There is no clear competitor yet, other than gold. But if this happens, the American market could be shaken. On the other hand, if other countries bring their regulations, financial media, and corporate transparency to the level of the American stock market, these things could improve. Frankly, I don't see many candidates for that position in the world, but it could happen in the future.

But you know what's most important? If the number of countries producing good companies increases, this could become possible. China is starting to become more important. China has caught up with the US in many technologies, or is slightly behind, and ahead in others. Therefore, I can say that the only stock market that interests me besides the US is the Chinese stock market, but due to issues like transparency and the difficulty of investing, it still doesn't work. When I want to research a Chinese stock today, language barriers arise, of course. Because we can't understand the local Chinese market. We have to read through American sources, which makes it difficult.

Another exciting market is India, which is now producing good companies. India is on its way to becoming a serious technology country. It has some of the best engineering faculties in the world. They train excellent engineers. Software companies and hardware companies are emerging. When you look at America today, Indians are already running companies like Google and Microsoft; that's actually interesting. Taiwan is a prime example. And there are many companies from there, especially TSMC. What matters is those making technological breakthroughs. But I still find American companies more comfortable. Why? For all the reasons I've mentioned, the value of American companies is increasing rapidly because the world is comfortable with them. This doesn't mean these companies won't lose value, nor does it mean these trends won't change. China and India are doing the right things.

Meanwhile, company valuations could also see adjustments from here. I even predict a correction by the end of this year. It could even happen in September, but it's difficult to predict. But why are American companies so expensive overall? Don't just dismiss it as a bubble. There are many underlying factors contributing to the value of American companies. Most importantly, they still own some of the world's best companies. They market them very effectively. They have a strong stock market management approach. Strong capital markets are the primary driver of a country's rise. Look at how the AI ​​revolution is progressing so rapidly in America. Because the value of AI companies is rising rapidly. They immediately sell new stocks at these high valuations. They take on new debt. They invest this money and make the fastest data center investments. In other words, capital markets are crucial. Because if companies can access capital easily and cheaply, it allows them to make the right investments and grow. Unfortunately, in many countries around the world, the structures don't have this level of strength. For all of this, I still prefer to invest in the American stock market, but of course, I continue to closely monitor all global developments. I hope this has been helpful.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.