Why the US is really ‘exceptional’

 

Explaining US Exceptionalism

 

The consistent outperformance of US equities against other World stock markets has often been ascribed to 'US exceptionalism'. Paradoxically, the US growth record is slightly inferior to other economies and US interest rates have frequently been above equivalent yields recorded in both the Eurozone and Japan. Nonetheless, US valuation multiples have still expanded by more than in other World markets. We explain this textbook puzzle by looking inside the traditional P/E multiple and show that they are mainly driven by implicit liquidity and asset allocation factors. We conclude that the US is exceptional, but for non-fundamental reasons explained by demographics and pension industry effects.

 

 

See our latest published research, Global View - Explaining US Exceptionalism - December 2021