The fading of American exceptionalism: the shift of global investment vision

Against the backdrop of the fading investment belief of American exceptionalism, investors who once firmly bet on the US stock market have begun to turn their attention to other parts of the world. In the past, the US stock market has become a safe haven for global capital with its strong economic foundation, technological innovation capabilities and policy support. However, with the occurrence of a series of economic and political events, this dominance is facing unprecedented challenges.

In recent years, US economic policies have become increasingly uncertain. The shadow of the trade war during the Trump era has not dissipated, and the large-scale cuts in government efficiency and spending adjustments have made the market uneasy. Economic data also showed signs of weakness, causing investors' confidence in the US economic outlook to begin to waver. At the same time, other countries and regions have shown strong growth momentum, especially some economies in Europe and Asia. Germany's massive spending plan, aimed at improving defense and infrastructure, has not only boosted the eurozone economy, but also attracted the attention of global investors. The rapid development of China's science and technology field, such as the rise of artificial intelligence startup DeepSeek, has posed a threat to the US's technological hegemony.

Against the backdrop of this global economic and market landscape change, investors' strategies have also been adjusted accordingly. In the past, betting on U.S. stocks seemed to be a risk-free option, but now, more and more people are beginning to avoid risks and diversify their funds into other markets. This year, the so-called "Big Seven" stocks have performed poorly, falling by a combined 11%, dragging down the overall performance of U.S. stocks and making them lag behind Chinese and European stocks. At the same time, the strong position of the U.S. dollar has also begun to shake, with the U.S. dollar index falling nearly 4% from its peak at the beginning of the year, and the voices of bearishness on the U.S. dollar are increasing.

The recovery of the European economy and the release of growth potential have made the euro a new favorite of investors. Under the expectation that the German government will loosen the "debt brake", eurozone bond yields have risen sharply, attracting a large amount of capital inflows. At the same time, the decline in U.S. Treasury yields and increased volatility have weakened its relative appeal. Investors have begun to look for more stable havens, such as gold and the yen, to reduce their dependence on U.S. bonds.

This shift in the market did not happen overnight, but the trend is already evident. Although the U.S. market still has strong fundamentals, the volatility of its economy and policies, as well as the release of growth potential in other parts of the world, have given investors more choices. Daniel Skelly, head of Morgan Stanley Wealth Management's market research and strategy team, pointed out that this rotation of global markets may continue in the next 6 to 12 months.

It is worth noting that the US economy still faces many challenges. The mixed non-farm payrolls data and the uncertainty brought about by the government's extreme policies have increased the risk of recession. Treasury Secretary Bessant's warning also shows that the US economy is in a period of adjustment and transformation, which will inevitably bring some pain.

In today's globalized world, capital flows are freer and faster, and investors' choices are more diverse. Although American exceptionalism will not disappear completely, its dominance has suffered a major blow. Investors are reassessing the risks and opportunities in the global market and looking to a broader world. "American exceptionalism will continue to exist, but it will definitely be hit hard," said Troy Gayeski, chief market strategist at FS Investments. In this era of uncertainty, global investors need to be more flexible and prudent in formulating their investment strategies.