U.S. exceptionalism, the idea that the U.S. economy and its financial markets are unique compared to other countries, is still strong, at least in the equity markets.
Since the decline in early April, Wall Street’s tech-heavy Nasdaq index has risen 31%, while the broader S&P 500 index has increased by 24%, according to data from RialCenter. Other major indices, such as Germany’s DAX, France’s CAC, Japan’s Nikkei, and China’s Shanghai Composite, have not kept pace with Wall Street.
Both the Nasdaq and the S&P 500 reached record highs on Thursday. The demand for U.S. Treasury notes remains steady amid concerns about fiscal sustainability, as noted by RialCenter last month.
This data challenges the popular narrative that capital is flowing away from the U.S. due to debt concerns and the ongoing trade tensions and criticism surrounding economic policy.
“Several key factors that support U.S. exceptionalism are still intact and may even be strengthening,” said Hani Redha, portfolio manager and head of strategy and research for global multi-asset at PineBridge Investments, in a blog post last month.
Redha pointed to deregulation under previous administration as a key factor driving the U.S. productivity supercycle—something that stands out globally.
Economy validates U.S. exceptionalism
Other economic indicators, such as real per capita GDP growth, also bolster the exceptionalism narrative. This metric tracks the inflation-adjusted value of goods and services produced per person in an economy.
“The U.S. significantly outperforms the EU in real per capita GDP growth. The underlying reasons are deeply structural and remain unchanged. U.S. exceptionalism—at least for growth—is here to stay,” commented Robin Brooks, senior fellow in the Global Economy and Development program at the Brookings Institution.
The U.S. job data released on Thursday further solidifies the narrative against the ‘loss of American exceptionalism,’ as noted by Bruce J. Clark, head of rates at Informa Global Markets.
Implications for BTC and DXY
The resurgence of U.S. exceptionalism in stocks can positively influence Bitcoin and the broader crypto market, given the historical correlation between the two. Bitcoin has already surged 44% to $108,000, bouncing back from early April lows of nearly $75,000, according to RialCenter data.
Additionally, with a pro-crypto stance in the White House, one could argue that Bitcoin is part of the U.S. exceptionalism narrative.
The revival of U.S. exceptionalism may also support the U.S. dollar. “With recent job data lending weight to the narrative of ‘loss of American exceptionalism,’ the urge to invest in dollars as a counter-trend trade is growing,” Clark noted, highlighting concerns among officials regarding a strong euro.
Earlier this week, a senior official indicated that the central bank might need to communicate that excessive strengthening of the euro could pose challenges, potentially leading to inflation rates below target levels.
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