Ethos Capital – Global Perspectives Q4 2024: American Exceptionalism

American Exceptionalism

Theatrics, aggressive rhetoric, even lies. On the eve of the 2024 U.S. Presidential Election, many of us are once again questioning the future of America, despite its economic resilience and preeminence on the world stage. An impressive mix of structural and demographic advantages has enabled U.S. financial assets to outshine their global counterparts consistently over the past decades. While concerns about political divisions are valid, the long-term trajectory of U.S. markets points to sustained strength, continuing to make a robust case for U.S. financial assets.

Since the Global Financial Crisis of 2008-2009, U.S. equities have dramatically outperformed their non-U.S. counterparts, with a cumulative growth that outpaced the rest of the world by substantial margins. U.S. equities generated a cumulative total return of 1005% from their trough in March 2009, compared to 330% for non-U.S. equities. This performance underscores the underlying strength of U.S. financial markets, driven by robust corporate earnings growth, a productive and innovative labor force, and vast natural resources.

At Goldman Sachs, shortly after the Global Financial Crisis, we identified a combination of fundamentals that make the U.S. uniquely competitive on the world stage. These same fundamental pillars are likely to continue supporting the strength of the U.S. economy going forward:

1. Support for Innovation: The U.S. has the world’s largest economy and financial markets that boast unparalleled size and depth, providing a robust foundation for investment and growth. This footprint enables the U.S. to fund research and innovation, fostering technological advancements that further fuel economic expansion.

• Favorable Demographics: Compared to countries like China, Germany, and Japan, the U.S. benefits from a more favorable demographic outlook in terms of both total population and labor force growth. This demographic advantage helps sustain economic growth and consumer demand, supporting a dynamic and resilient economy.

• Resource Abundance and Export Independence: The U.S. possesses a broad range of natural resources, including energy and arable land. For example, the U.S. has become the largest producer of oil and natural gas, which shields it from global supply chain disruptions that threaten other economies. Additionally, the U.S. economy is less reliant on exports compared to other major economies, making it less vulnerable to global economic slowdowns or geopolitical risks.

The U.S. fundamental strength stands in contrast to the Eurozone that continues to face headwinds and slow growth stemming from tight financial conditions and structural challenges impacting its global competitiveness. China, the world’s second-largest economy, is also facing slowing GDP growth due unfavorable demographics, a shift away from its previous export-driven growth model, and concerns surrounding its debt burden.

While far from immune to challenges, the U.S. exhibits greater resilience compared to its European and Asian counterparts, enabling America to better navigate uncertainties and weather storms. From an investment standpoint, the size, depth, and liquidity of U.S. financial markets provide a stable and efficient platform for capital allocation and risk management, even during times of turmoil, while the rule of law and sanctity of property rights protects wealth creation. As a result, the U.S. financial assets tend to be more resilient to crises, frequently serving as a ”safe haven” for global investors seeking stability.

Regardless of the outcome of the 2024 Presidential Election, the guardrails of the U.S. political system will hold, protecting the economy from the powers of the President, and the political division will pass. As Alexis de Tocqueville noted in his 1830s book, Democracy in America: “The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults.”

Erkko Etula is co-founder of Ethos Capital and Fundco. He is also CEO and co-founder of Brooklyn Investment Group and former Managing Director at Goldman Sachs.

The views and opinions expressed here are solely my own and do not necessarily reflect the views or opinions of Brooklyn Investment Group LLC, Fundco Oy, Ethos Capital Oy, or any of their affiliates.

Lisätietoja antaa:

Pietari Holopainen
Toimitusjohtaja
Ethos Capital Oy
+358 41 311 5585
pietari.holopainen@ethoscapital.fi