What I tell you today should dispel all sense of confusion as to why the US stock market tends to go up.
This is something we teach in the Academy to a very precise degree, as well as multiple other components but today, we’ll be focusing on the segment ‘Why Do US Stocks Go Up?’…
Quick snapshot of what’s included when you join (in the brainwashing segment).
PS. you can join the Academy for 20% off today - the price will be increasing again next week due to more testimonials coming in showing the change people have experienced).
In addition, you get a 1h call with me to go over your portfolio in detail and compose a portfolio based on who you are and what might work best for your situation.
We’ll fix any blind spots and you’ll walk away with clarity in just an hour.
So let’s dig into why US stocks specifically go up, and it’s something that I haven’t seen mentioned much at all.
And yes, the subject line might be confusing right now, but bear with me.
We all know the world runs on incentives.
If you say to a child hey can have ice cream if they pick up their toys, more often than not they’re going to go and pick up their toys and messily put them back as best they can.
Some kids might put them back really precisely in the right boxes without getting distracted.
Some might sort of chuck them in the general area, but it’s still an OK job well done.
But the fact is, the child was incentivised to do a task and they completed it, with varying outcomes.
Boards of listed companies are the same.
Imagine instead of ice cream, you give the board some magical piece of paper called equity where if they are able to increase a magical number by increasing profits, they personally can earn more.
Now get this stat.
The biggest difference between the UK stock market and the US markets is not culture. It is what the executives on the board get paid in.
A US CEO’s pay is the share price. Median S&P 500 package… about $16–17 million, and two-thirds to three-quarters of that is equity. Salary is the rounding error. Every year the board drops a pile of stock on the people who run the company. When the ticker rises, they get rich. When it falls, their wealth falls with it.
A UK CEO owns stock. That is not the same thing. Median FTSE 100 package: about £4.6–5.1 million. The LTIP is real - roughly half the pay - and the typical chief executive holds around 5× salary in shares. Then the machine stops. Shareholders cap the award. The plan usually needs three years of hitting targets, not just a higher quote. The equity is a slice of a smaller pie, not the pie.
Size match the firms and the gap survives. US CEOs at comparable companies still take home about 3×, and the extra is almost all stock.
So the incentive is not subtle. In New York, the executives on the board have a leveraged claim on the multiple. In London, they have a professional package that includes some shares. One market pays people to make the price go up. The other pays people to run the company and hopes the price follows.
So if you ever wonder why the US tends to outperform the UK, that is largely your answer.
At a foundational level, US boards, the people who run the companies, are massively incentivised to boost the share price.
In the UK, they are not.
To put it more simply, in the UK boards are told they’ll just get some sprinkles on their ice cream whereas US execs are told they’ll get a full sundae a few times per week (do not make a joke about weight here).
So you can start to see why insider selling is a good thing.
If boards are provided the means to sell equity at a higher price to enrich themselves, you can be damn sure they’re going to enrich you too - you just need risk management structures to help you get out.
If you start to weave ideas like this into your portfolio, you tend to get to a place where you can subdue those bearish noises because you’re coming from a place of understanding that is beyond just looking at a chart and some data.
And this is where the Academy comes in.