 U.S. Exceptionalism is Dead!Bank of America is calling it a “bull crash.” The idea is that the big institutional investors haven’t turned downright bearish on U.S. stocks, they just aren’t as bullish… Back on February 18, BofA noted that the cash level had fallen to 3.5% the lowest level since 2010. That’s a sign that investors were very bullish – going “all in” on the idea that asset prices would go higher. From a contrarian point of view, this is a bearish signal. For one, if there’s little cash on the sidelines, who’s left to buy? And two, if things do take a turn for the worst, that’s just more selling pressure as they hit the sell button and run for the exits – making any sell-off worse… And so the 10% correction for the S&P 500 that started on February 20 – two days after that BofA note – has been one of the fastest corrections the market has seen in the last 100 years. There hasn’t been any crisis, no banks have failed and there haven’t been any significant revisions to earnings. But there are some negatives under the surface that we’ve discussed, like rising delinquencies on credit cards and car loans, a stagnant housing market, a spike in announced layoffs, slowing consumer spending… Plus, even though the most recent inflation numbers were very good, overall prices are still up 15% to 20% across the board… In good times, these would be your basic “wall of worry” type stuff. No economy is perfect, there are always things to worry about if you are so inclined – there’s always weak data and there’s always a very vocal perma-bear crowd around to tell you it’s all leading to the BIG CRASH. It usually isn’t… The U.S. economy is the most dynamic in the world and can be counted on to climb the “wall of worry” 9 times out of 10. This is the very essence of American “exceptionalism.” But now we have “uncertain” policy regarding tariffs and Ukraine and I’m seeing the phrase “end of American exceptionalism” repeated all over the place… All in All, It’s Just Another Worry on the Wall One of the unintended consequences of “uncertain” policy is happening in Europe. It appears that European countries are making good on their promises to boost spending on defense, and in a seachange move, they are re-writing their own rules about taking on debt to do it. It is said that money goes where it is treated best. The follow-on effects of increased EU spending on defense would be good for GDP growth there, and that’s a very simple reason that the UKs FTSE Index (yellow line) is vastly outperforming the S&P 500 this year:
A comparison between the S&P 500 and the China Large Cap ETF (FXI) is even worse:
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Every couple of years, you can count on Wall Street “strategist”-types to come out with the whole “discounted European stocks look like an attractive alternative to fully valued US stocks” thing. Usually, the net result is nothing: EU stocks go on trading at their steep discount. Every once in a while, EU stocks actually do outperform US stocks. So maybe this time around, U.S. stocks really are losing their exceptionalism. Maybe…but then there’s this:
That’s the same S&P 500 and FTSE comparison, going back to 2014. The two indexes started to diverge in the second half of 2017. But look at the post-COVID recoveries… The comparison is even more stark with China:
Every dog has its day, I guess. And I’m fine with the EU and China having a little moment in the sun. History says it won’t last and at some point, the money that’s rotated out U.S. stocks and into Europe and China will rotate right on back… And that’s fine by me because it means I can pick up quality stocks on sale. Cheers, Briton Ryle X/Twitter: https://twitter.com/BritonRyle You Might Also Like: 3 Bargain Stocks Ripe to Reward You in 2025 These 3 stocks offer huge upside – and they’re all selling for less than $20 Grab Your Free Report Before it’s Too Late Cool Story, Bro! https://www.outsiderclub.com/the-legend-of-a-stock-market-operator/ Tesla’s Promises https://www.outsiderclub.com/headline-of-the-day/ What is American Stock investor? https://www.outsiderclub.com/asi-average-gain-69-nice/ |
Selasa, 18 Maret 2025
U.S. Exceptionalism is Dead!
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