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Equity
Andy Budden
The term American exceptionalism has been used quite widely in recent years. However, the concept has been around since the mid-19th century, suggesting that there is something about American society, culture and economics that sets it apart from other countries on an enduring basis.
By exploring the concept of American exceptionalism through an economic and investment lens, we looked to answer the following questions:
- Is American exceptionalism real?
- Can it continue?
- What does it mean for investors?
Economic exceptionalism
In terms of its economy, the US has generated persistent long-term growth, and while other regions have experienced periods of strength, they have broadly struggled to deliver the same reliable long-term outcomes.
Of course, today there are risks to the US maintaining its successful economic track record. A prolonged recession, higher inflation, policy missteps, and/or competitive threats from other regions are all distinct possibilities. One, or any combination of these, could become a chink in the American armour.
Are the economic foundations that have supported sustained growth since World War II robust enough to survive over the longer term?
Exceptional equity markets
The past successes of US economic growth have largely translated into a strong equity market. A favourable regulatory backdrop, attractive management incentives, strong links to academia and the emergence of innovation hubs have combined to create an environment that has been particularly rewarding for shareholders.
US equities have consistently generated higher return on equity than other major markets
Past results are not a guarantee of future results.
Data from January 2010 to December 2024. Source: Factset
But American exceptionalism has come at a price.
Until now, investors have been willing to pay for it. With valuations and concentration now at historically high levels, investors are increasingly wondering what to do with their US equity exposure.
To read the in-depth study on American exceptionalism
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Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.