U.S. exceptionalism, the notion that the U.S. economy and its financial markets are distinct compared to those of other nations, remains alive and well, at least according to the equity markets.
Since the early April slide, Wall Street’s tech-heavy Nasdaq index has surged 31%, while the broader S&P 500 index has rallied 24%, according to data source TradingView. Other major indices, such as Germany’s DAX, France’s CAC, Japan’s Nikkei, and China’s Shanghai Composite, have lagged behind Wall Street.
Both Nasdaq and the S&P 500 traded at record highs Thursday. Demand for U.S. Treasury notes has held up amid concerns about fiscal sustainability, as noted by CoinDesk last month.
The data contradicts the popular narrative that capital flows are rebalancing away from the U.S. en masse due to debt jitters and President Donald Trump’s trade war and repeated criticism of the Federal Reserve.
“Several key factors that underpinned U.S. exceptionalism remain fully intact and are perhaps even strengthening further,” Hani Redha, portfolio manager, head of strategy and research for global multi-asset at PineBridge Investments, wrote in a blog post published last month.
Redha pointed to deregulation under Trump as a key factor supporting the US’s productivity supercycle – unique among global peers – and its lead globally.
Other economic variables, such as the real per capita GDP growth, also support the exceptionalism narrative. The metric measures the rate at which the value of goods and services produced per person in an economy is adjusted for inflation.
“The U.S. massively outperforms the EU in terms of real per capita GDP growth. The reasons for that are deeply structural and haven’t changed one bit. U.S. exceptionalism – for growth at least – is here to stay…,” Robin Brooks, senior fellow in the Global Economy and Development program at the Brookings Institution, said on X.
The U.S. jobs data released Thursday further added another stake in the ‘loss of American exceptionalism narrative, as Bruce J Clark, head of rates at Informa Global Markets, said on LinkedIn.
The return of U.S. exceptionalism to U.S. stocks can be viewed as a positive development for bitcoin (BTC) and the broader crypto market, given the historical positive correlation between the two.
BTC, the leading cryptocurrency by market value, has already risen 44% to $108,000, rallying swiftly from the early April lows of nearly $75,000, according to CoinDesk data. Moreover, with the pro-crypto president in the White House, one may argue that bitcoin is part of the U.S. exceptionalism play.
Meanwhile, the return of U.S. exceptionalism could also put a floor under the U.S. dollar. “With today’s jobs data putting another stake in the ‘loss of American exceptionalism’ narrative, the temptation to get long dollars here for a counter-trend trade is big and growing,” Clark noted, adding the ECB officials’ growing discomfort with the strong euro.
Early this week, the FT reported, quoting a senior ECB official, that the central bank may need to signal that too much strengthening in the euro could be an issue, as it might lead inflation to hover below targets. Meanwhile, in an interview with Bloomberg, ECB Vice President Luis de Guindos said that “overshooting” of the euro should be avoided, flagging levels above 1.20 as complicated.
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