This Round of American Exceptionalism Is Mediocre at Best

The "Sell America" trade seems to have run its course four months after the start of an alarming and correlated selloff in US stocks, bonds, and the dollar.

- JONATHAN LEVIN

Equities have climbed back to all-time highs, and the bond and currency markets have stabilized. The signal from foreign investors is that they can't exactly escape the world's deepest and most liquid financial markets. All this despite President Donald Trump's volatile and haphazard approach to trade and immigration, attacks on the Federal Reserve, and threats to the integrity of US economic data, among many other things.

A lazy interpretation is that critics were simply wrong about the Trump agenda. But just because calamity has been avoided doesn't mean praise is warranted. The reality is that America's economy is generally muddling through, expanding just enough to keep recession fears at bay yet far from its performance the last couple of years when it was widely regarded as "the envy of the world." Consider it a downshift from "American exceptionalism" to "American mediocrity."

Start with the equity market. After a series of wild swings over March, April, and May, the benchmark S&P 500 Index is up 9.6 percent for the year on a total return basis. On its face, that's a fine performance. But by comparison, the MSCI World Index, excluding the United States, has surged 23.4 percent, supported by global financial, industrial, and communication services companies. At this pace, American stocks would deliver their worst relative performance since 1993.