The 'American exceptionalism' trade died awfully fast

The 'American exceptionalism' trade, which once dominated global markets, has seen a rapid decline in recent months. This trade, characterized by the outperformance of US equities and the economy compared to other nations, has been fueled by robust consumer spending, a resilient labor market, and pro-growth fiscal policies. However, several factors have contributed to its demise, including:

1. Economic Data Turning Lower: US economic data has been deteriorating, with indicators such as the ADP report and Citi economic surprise index suggesting a potential economic contraction. This is a stark contrast to the robust economic growth that initially fueled the 'American exceptionalism' trade.
2. Shift in US Stock Market Leadership: There has been a significant shift in US stock market leadership in 2025, with defensive sectors like healthcare, tobacco, and transport outperforming. This is a departure from the tech-dominated leadership that characterized the 'American exceptionalism' trade.
3. Reduction in Regional Concentration Risks: Other global indices, such as the Eurostoxx 50 and Dax, have outperformed the S&P 500 in 2025. This reduction in regional concentration risks means that the msci world index may see a decrease in the US's share, which was previously above its long-term average.
4. Weakening of US Tech Sector: The US tech sector, which was a significant driver of the 'American exceptionalism' trade, has been in a downtrend. The rise of DeepSeek, a Chinese AI company, has challenged the valuation premium of American tech companies, further weakening the US tech sector's dominance.
5. Policy Uncertainty and Tariffs: The Trump administration's unconventional economic policies, including tariffs on Canada and Mexico, have created uncertainty and weighed on US stock market sentiment. This is a departure from the pro-growth policies that initially drove the 'American exceptionalism' trade.

The rapid decline of the 'American exceptionalism' trade can be attributed to these specific factors, which contrast with the fundamentals that initially drove its success. As the US economy and stock market face new challenges, investors may need to reassess their expectations for US exceptionalism and consider the potential for a more balanced global market landscape.

In conclusion, the 'American exceptionalism' trade has died awfully fast, as several factors have contributed to its demise. As the US economy and stock market face new challenges, investors may need to reassess their expectations for US exceptionalism and consider the potential for a more balanced global market landscape.