Dr. Alan O'Sullivan

exceptionalism, that U.S.

has got something special.

And indeed, we can find with long-run data that U.S.

earnings growth fundamentally has been something like 1% a year compared to the rest of the world.

But that edge rose to 2.5%, 3% in the last decade.

And so, again, richening has been even more important, but clearly there was something coming from the fundamental side as well.

And this is something which I think explains why those valuations are high.

The people with this rear view mirror of the last 10, 15 years think that we can now expect something like up to 3% annual growth advantage.

And that is so exceptional.

When you look at historical data, you just don't get that for too long.

This is about the longest period that something like that has happened.

And now it has become sort of the norm that this should keep going forever.

And I think that type of mindset can explain why we have those double valuations.

But I think the scope for disappointment is great for such expectations.

So this is, and we may come to that with later paper discussions, that basically value-based approaches tend to work, and sometimes they fail very sadly, and sort of the U.S.

equity problem.

Strength, both in an absolute sense and relative sense in the last 10, 15 years has been making people doubt these approaches because US equities look relatively expensive already a while ago and then they just kept going richer and in an absolute sense by themselves and then compared to the other markets.

So, you know, like when the ratio was versus the rest of the world was 1.5, it looked pretty extreme.

Well, now near two, it looks even more extreme.

And then some people draw the lesson that we should just ignore these valuations now.