U.S. Exceptionalism in Financial Markets

U.S. exceptionalism, the idea that the economy and financial markets of the U.S. are unique compared to other countries, remains strong, particularly in equity markets.

Since early April, Wall Street’s tech-heavy Nasdaq has surged by 31%, while the broader S&P 500 index has increased by 24%, as reported by TradingView. Other significant indices, like Germany’s DAX, France’s CAC, Japan’s Nikkei, and China’s Shanghai Composite, have underperformed compared to Wall Street.

Last Thursday, both Nasdaq and the S&P 500 traded at record highs. Despite concerns about fiscal sustainability, demand for U.S. Treasury notes remained robust, according to CoinDesk’s report last month.

This data contradicts the narrative that capital is moving away from the U.S. due to debt issues, President Trump’s trade policies, and criticisms of the Federal Reserve.

Hani Redha, portfolio manager and head of strategy and research for global multi-asset at PineBridge Investments, stated in a blog that several key factors supporting U.S. exceptionalism are still intact and possibly strengthening. He pointed to deregulation under Trump as a crucial element fostering the U.S.’s unique productivity growth among global peers.

Economy Confirms U.S. Exceptionalism

Other economic indicators, such as real per capita GDP growth, back the exceptionalism argument. This metric reflects the value of goods and services produced per person, adjusted for inflation.

According to Robin Brooks, a senior fellow at Brookings Institution, “The U.S. significantly outperforms the EU in real per capita GDP growth. This growth is driven by structural factors, and U.S. exceptionalism is likely to endure.”

Recent U.S. jobs data also supports the assertion of U.S. exceptionalism, as stated by Bruce J Clark from Informa Global Markets on LinkedIn.

Implications for Bitcoin and the Dollar

The resurgence of U.S. exceptionalism in stocks bodes well for bitcoin and the broader crypto market, due to their historical positive correlation. Bitcoin has risen 44% to $108,000, recovering quickly from lows of nearly $75,000 in early April, according to CoinDesk data. With a pro-crypto president in the White House, bitcoin may be seen as part of the U.S. exceptionalism narrative.

Additionally, the revival of U.S. exceptionalism could support the U.S. dollar. Clark pointed out that the recent jobs data undermines the ‘loss of American exceptionalism’ perspective, increasing the appeal of long dollar trades. Within this context, there’s growing caution from ECB officials regarding a strengthening euro, which they fear could push inflation below target levels. An ECB official remarked that the central bank might need to communicate concerns over excessive euro strength. Vice President Luis de Guindos also emphasized the importance of avoiding an ‘overshooting’ of the euro, particularly at levels above 1.20, which could complicate inflation management.