MW As the Fourth of July approaches, here are 4 reasons 'American exceptionalism' isn't going away

By Joseph Adinolfi

Don't listen to the skeptics: The factors that make the U.S. economy great are likely here to stay, one Wall Street strategist says

For decades, U.S. financial markets have been widely considered one of the world's most attractive destinations for investor capital. It didn't hurt that the stock market generally had the returns to back this up.

That reputation has taken a hit in 2025. President Trump's tariffs, concerns about the ballooning U.S. government debt, and a runaway decline in the U.S. dollar DXY have helped popularize the notion that "American exceptionalism" - the idea that the U.S. is home to world's most dynamic capital markets - might have finally peaked.

In a sense, investors appear to be voting with their feet. Stocks in Germany DX:DAX, Hong Kong HK:HSI and elsewhere have rocketed higher this year, leaving their American rivals in the dust - although the S&P 500's SPX record-setting rebound from April's tariff-induced selloff has helped narrow the gap somewhat.

But one Wall Street strategist cautions that investors shouldn't read too much into these short-term moves.

Many of the factors that helped make U.S. capital markets so great to begin with remain intact, said Hardika Singh, an economic strategist at Fundstrat Global Advisors. Just because foreign stocks have taken the lead over the past few months doesn't mean the shift will prove permanent.

"In the next five to 10 years, it is hard to foresee a scenario where America loses this lead," Singh told MarketWatch in a phone interview Wednesday. "I think being faithful to U.S. will pay great dividends in the future for investors."

In written commentary shared with MarketWatch, Singh highlighted four reasons why U.S. companies should continue to offer the best value for investors over the long term.

Innovation

The rise of artificial-intelligence technology is rapidly changing so many aspects of society, including labor markets, business models, education and so many other things. China is doing its best to catch up. But the U.S. remains the undisputed leader in AI, Singh said.

It is home to Nvidia Corp. $(NVDA)$ and OpenAI Inc., two pioneers of AI innovation.

It also helps that America has the world's highest number of AI computing data centers at 26, according to Oxford University researchers' data cited by Singh. China has 22, the European Union has 28, and other Asian countries have a total of 25.

Productivity

The U.S. workers are productivity powerhouses, especially when compared with their European and Canadian peers.

Since 2014, workers in the U.S. have boosted their productivity by 17%, according to a report from RBC Wealth Management. By contrast, growth in the eurozone and the U.K. has been a relatively tepid 5% and 6%. Meanwhile, in Canada, it has stagnated.

AI will likely further supercharge workers' ability to efficiently get stuff done, Singh said.

Big Money

The worst wave of inflation in decades has squeezed the budgets of millions of Americans. Still, the U.S. remains one of the best places on the planet to make big money, Singh said, evidenced by the sheer amount of wealth held within its borders.

UBS Wealth Management USA's latest Global Wealth Report found that 35% of all wealth is held in the U.S. It is also home to nearly 40% of the world's millionaires, roughly four times the number in China, which has the second largest share.

Corporate profits

Finally, U.S. companies are extremely skilled at generating returns on invested capital.

"No other companies anywhere in the world can match the dynamism and return on invested capital of American tech giants," said Garrett Melson, portfolio strategist with Natixis Investment Managers Solutions, via email.

As the chart below shows, members of the Magnificent Seven - a cohort of elite U.S. companies - have handily surpassed the return on invested capital of the seven largest European companies.

Return on invested capital measures how efficiently a company converts money invested by equity and bondholders into after-tax profits.

-Joseph Adinolfi

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July 02, 2025 15:52 ET (19:52 GMT)

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