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As US stocks come back down to earth, what’s next for investors?

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As recently as September 20, Wall Street’s leading S&P 500 stock index had delivered a year-to-date return of nearly 10 per cent. Its tech-laden counterpart, the Nasdaq Composite index, had performed even better, rising more than 16 per cent since the start of this year as the popular technology sector continued to turbocharge a rally in American stocks.

The so-called America First trade, although under pressure from high valuations and rising interest rates, was far and away the best bet for equity investors in increasingly volatile global markets.

Fast forward seven weeks, and the investment landscape has changed significantly. Last month’s fierce sell-off in stocks has pared gains since the start of the year to under 5 per cent for the S&P 500 and just under 10 per cent for the Nasdaq Composite. What is more, the once-resilient US corporate debt market is under strain, with the spread on high-yield, or junk, bonds last month recording the sharpest rise since early 2016, according to the Financial Times.

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The fading outperformance of US equities is also evident from a glance at global markets. Last month, the MSCI All-Country World Index ex USA, a gauge of non-US stocks, fell less sharply than the Nasdaq Composite. Since Wall Street’s sell-off........

© South China Morning Post