If there is one theme that has dominated financial markets since US President Donald Trump began his second term, it is the future of “American exceptionalism”. This is the notion that US assets deserve to be valued more highly because of the US dollar’s role as the world’s pre-eminent reserve currency, America’s huge natural and human resources, deep and transparent capital markets and the dominance of US technology companies in global stock market indices.
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Some investment strategists believe Trump’s ruinous trade tariffs, blatant disregard for the rule of law and irresponsible fiscal policies have chipped away at the perceived safe-haven status of US assets. The results of Bank of America’s latest global fund manager survey on June 17 showed investors had the most underweight position in the US dollar in 20 years, while more than half of the respondents expected global stocks – as opposed to US equities specifically – to be the best-performing assets in the next five years.
Yet while there are signs US exceptionalism is fading, the first five months of Trump’s second term have, if anything, thrown America’s unique advantages into sharp relief. US exceptionalism, particularly the natural resource and financial underpinnings, is amplifying the impact of Trump’s reckless foreign and economic policies.
A few years ago, the consensus among energy analysts was that an Israeli or US attack on Iran’s nuclear facilities would cause oil prices to exceed the record high of US$147 a barrel in July 2008 and potentially go as high as US$200 or US$250 a barrel. Such a scenario was viewed as the mother of all oil supply shocks, given the Middle East’s central role in global crude production.
Yet even after the United States joined Israel’s bombing raids and struck Iran’s nuclear facilities, Brent crude, the international oil benchmark, stands at US$67 a barrel. That is about 10 per cent lower than on June 13, when Israel went to war with Iran.
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Several factors are at work, notably a fragile ceasefire between the two foes. The most important one, however, is the US shale boom that has transformed America – which was a net importer of oil as recently as 2019 – into the world’s biggest oil producer, accounting for more than a fifth of global output.