Questioning American exceptionalism
Back in November, Oxford Economics remained optimistic that U.S. exceptionalism would continue in 2025, noting that it’s not the first time the economy “has dealt with elevated uncertainty” and that businesses would be able to “quickly adapt.”
With “the prospects for expansionary fiscal policy on top of an already solid backdrop for U.S. consumer spending and investment, the U.S. economy will likely further distance itself from the rest of the pack,” it noted.
Fast-forward a couple of months, and a lot has changed. U.S. CEO confidence plummeted in March, according to one survey, and the Trump administration’s gyrating tariff threats was the most commonly cited reason for declining optimism. U.S. consumer confidence has also tumbled. The Federal Reserve has lowered its gross domestic product (GDP) growth forecast to 1.7% from 2.1%.
Citi strategists are saying U.S. exceptionalism has “paused” under the Trump administration. Not only has the bank downgraded U.S. stocks to “neutral,” it has upgraded Chinese stocks to “overweight,” and recommends taking profits in U.S. stocks to invest in Chinese companies.
J.P Morgan’s chief economist Bruce Kasman told Reuters the country's standing as an investment destination and its “exorbitant privilege” are at risk of lasting damage if the administration undermines trust in U.S. governance.
Strategists at Morgan Stanley and Goldman Sachs downgraded GDP growth forecasts for the U.S. in 2025 over tariff concerns. They also raised their outlook for Chinese stocks, with Goldman Sachs strategists Kinger Lau and Timothy Moe noting that “China is back on the radar, at least in terms of investor interest.”
El-Erian also told Bloomberg that there’s hope for a “Sputnik moment” in Germany, as the country shifts fiscal policy to support a surge of spending on defense and infrastructure.
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Learn MoreHow can investors make sure they’re well diversified?
This may be a good time to make sure your portfolio is diversified geographically.
Vanguard, for example, recommends having 20% of your portfolio invested in international stocks and bonds, but “to get the full diversification benefits, consider investing about 40% of your stock allocation in international stocks and about 30% of your bond allocation in international bonds.”
One of the easier ways to gain broad exposure to international assets is ETFs. You have a choice of investing in developed markets (which would include the U.K., France and Japan) or emerging markets, like China, India and Mexico. Since emerging markets tend to be more volatile, Vanguard recommends “that you don’t overweight your allocation to emerging markets.”
When it comes to buying foreign stocks, ETFs are often a better choice than mutual funds, according to Forbes, since “ETFs are very portable from one brokerage account to another” and they’re “better at tax time.”
You’ll want to do your research or talk to your adviser about the potential risks involved such as market risk and liquidity, as well as costs, fees and tax issues. There are a number of ETF providers to choose from, including iShares by BlackRock, Vanguard, Charles Schwab, Invesco, WisdomTree and VanEck, among many others.
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