MacroResearchBoard

Continue To Bet On The End Of The U.S. Exceptionalism Theme – April 14, 2025

A just-published report examined the longer-term consequences of the U.S.-led trade war. Investors are realizing that this war is a massive policy mistake that will weaken the U.S. economy and sustain downward pressure on U.S. asset prices, including the U.S. dollar.

Although Trump bent to severe market pressure and paused most “reciprocal” tariffs (excluding China) last week, tariffs appear to be an ideological issue for the U.S. Administration. The implication is that the trade war is far from over.

A continuation of the trade war is relatively damaging for U.S. equities. When tariffs ultimately fail, Trump will likely pivot to substantially depreciating the U.S. dollar, which will deflate the relative value of all U.S. assets.

Net: investors should remain defensive and continue to bet on the ongoing rotation away from the U.S. exceptionalism theme, which will result in a marked narrowing of valuations between U.S. and non-U.S. risk asset markets.