At least that's what the market narrative suggests, which is based mainly on the poor performance of US assets (stocks, dollar) and, on the other hand, the outperformance of European and Chinese stocks (see Figure 1).
A weak dollar means a strong euro. In addition, we have the end of a large fiscal deficit in the US and the beginning of a large fiscal stimulus in Europe (this time, the markets are not bothered by high debt levels and rising debt service costs in Europe). If we add to this the rising prices of gold... then according to the markets, the last 2 months confirm that at least US exceptionalism trade is behind us.
Nevertheless, if we look at the last 5 years (Figure 2), US stocks have still provided significantly higher returns, and especially the technological Nasdaq 100.
Why could it be difficult to end US exceptionalism in the real economy? Let's look at how many technology companies (broadly understood) have annual pre-tax incomes (TTM) exceeding $10 billion - see Figure 3.
There are 10 such companies in the US, and zero in Europe and Japan. In Europe, the largest technology company is Dutch ASML, which generated 7.5 billion in gross income last year. In Japan, the largest technology company is Tokyo Electron, with an annual gross income of (only) 3.5 billion USD.
These 10 US companies generate annual revenues of $2.2 trillion (Figure 4) and $631 billion of pre-tax income (Figure 5). How to end “US exceptionalism” from this perspective? It certainly can't be reversed in two months..
On top, the short-term focused market may not appreciate (for now) two trump cards that the US can still use... the upcoming Trump’s pivot (softer tariffs / trade deals, tax cuts etc.), and the upcoming Powell’s pivot (lower interest rates).
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