American Exceptionalism - February 2025 Learning Spotlight

Over the past several years, the strength and resilience of the United States (U.S.) economy have distinguished it from other developed economies around the world. Recently, Wall Street analysts are using the term "American Exceptionalism" to highlight the performance gap between the U.S. stock market and other global financial markets. A key question is whether this trend can continue? Clearly, a strong U.S. economy has translated into healthy corporate profits and significant stock market gains.

Proponents of American exceptionalism argue that the U.S. central bank, financial system, and history of innovation are exceptional, suggesting that the country is both destined and entitled to play a leading role on the world stage. ⁽¹⁾

A key driver of recent American exceptionalism headlines was another impressive year for the S&P 500 in 2024. Following a 26.3% return in 2023, the U.S. S&P 500 index surged 25% in 2024, outpacing Europe’s Stoxx 600 by nearly 6%, the widest margin in four years. Meanwhile, Japan's Nikkei 225 Index rose 19.2%, and China's Shanghai Composite increased by 12.7% in 2024, according to FactSet data. ⁽²⁾

We believe there are four key components driving U.S. economic growth and resilience over the past several years. Looking ahead, these catalysts are likely to remain intact in 2025:

Strength of the U.S. consumer
Low unemployment
Domestic capital expenditure (Capex) in data centers and artificial intelligence (AI)
Remarkable earnings from many U.S.-based companies that are changing the way we live
A Federal Reserve that has successfully balanced monetary policy restrictions

At WT Wealth Management, we believe that America’s economic exceptionalism will continue into 2025. We feel the current economic “exceptionalism” drivers are firmly in place.

I’ll highlight one. The U.S. consumer has been a key-source of strength, initially powered by accumulated savings and generous government transfer payments during the pandemic. Fortunately, as these funds dwindled, a strong labor market fueled continued economic momentum. Wage gains and broad job creation helped boost personal income, the largest single source of spending power for most Americans.

Given that nearly 70% of U.S. economic activity is consumer-driven, nothing is more fundamental to the current health of the economy than job creation and income growth. In 2024, the labor market moderated but remained healthy compared to historical levels.

The U.S. unemployment rate rose from a post-pandemic low of 3.4% to 4.0% in January 2025. Nonetheless, at 4.0%, the unemployment rate remains well below the long-term average of approximately 5.7%. ⁽³⁾

Looking ahead, historical data suggests that while equity market returns may moderate after two very strong years, returns can still remain above the long-term 50-year average in the years following consecutive strong performance years.

Year	Dow Jones	S&P500	NASDAQ
1991	20.32%	26.31%	56.84%
1992	4.17%	4.46%	15.45%
1993	13.72%	7.06%	14.75%

1995	33.45%	34.11%	39.92%
1996	26.01%	20.26%	22.71%
1997	22.64%	31.01%	21.64%
1998	16.10%	26.67%	39.63%
1999	25.22%	19.53%	85.59%

2012	7.26%	13.41%	15.91%
2013	26.50%	29.60%	38.32%
2014	7.52%	11.39%	13.40%

2019	22.34%	28.88%	35.23%
2020	7.25%	16.26%	43.64%
2021	18.73%	26.89%	21.39%

2023	13.70%	24.23%	43.42%
2024	12.88%	23.31%	28.64%

https://www.1stock1.com/1stock1_142.htm

At WT Wealth Management, we believe the United States will continue to lead the world in stock market returns, as a large majority of the best, and most important, companies in the world are based within our borders. It’s unarguable these companies will continue to invest and lead in crucial areas such as energy, healthcare, technology, and, most importantly, innovation.

Many of our investment strategies are heavily U.S.-centric, and we are doubling down on our belief that U.S. returns will remain outsized. We expect domestic equity market leadership to continue, helping the U.S. market "stay in the lead" in 2025 and beyond.

*Grammar and Punctuation provided by ChatGPT.

SOURCES

American exceptionalism
wikipedia.org
U.S. stocks dominated global markets in 2024 - Why they likely won't in 2025
morningstar.com
US job growth slows in January; unemployment rate at 4.0%
reuters.com

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