The U.S. economy and stock market have outperformed. Can the American exceptionalism last?

From Fortune:

The concept of “American exceptionalism” is a controversial idea steeped in political history. The U.S. economy has surprised experts post-COVID, with a remarkable 3.3% annual GDP growth in the fourth quarter of 2023. American stocks have outperformed their developed peers with a 53% rise since January 2020. Factors such as energy independence and fiscal response have bolstered the U.S. economy’s surprising strength. While the U.S. has maintained economic momentum due to a robust fiscal response and resilience to rising interest rates, the increase in valuations presents risks for investors. Although diversification may be a wise strategy, the U.S. remains an outlier in economic performance.

A significant fiscal response by the U.S. federal government, alongside an aggressive monetary policy from the Federal Reserve, has contributed to the country’s resilient post-COVID economy. The U.S.’s direct financial aid and lower borrowing costs have helped consumers and businesses maintain stability and spend, riding out the storm of the pandemic. The forceful fiscal and monetary response may have contributed to inflation but also aided Americans in building up excess savings, preventing a recession.

In contrast to several developed nations, the U.S. has demonstrated remarkable resilience to rising interest rates. This is evidenced by the quick response of American consumers and businesses to lower borrowing costs, helping them bounce back from the pandemic faster than anticipated. Moreover, the fixed mortgage rates have provided insulation and delayed the impact of higher rates compared to other countries, such as the U.K.

Relative energy independence has helped the U.S. to outperform its developed peers. The country’s natural gas production has soared, offering a buffer from rising energy prices compared to its European counterparts. The U.S. energy industry’s dominance in the liquefied natural gas market and President Biden’s release of oil from the strategic reserve have further aided the country’s economic resilience.



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