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The writer is chairman of Rockefeller International. His last book is “what went wrong with capitalism”.
It is suddenly fashionable to speak how the era of the “American state of emergency” ends, in view of Trump’s politics, the decline in the dollar and the fact that the US stock markets have so far been below average its international competitors since 1987.
The surprise, however, is that despite the shocks that go out of Washington and the Middle East, the US shares are still grinding higher. And the US bond prices are despite the exploding US deficit. The American market performance is less unusual because the rest of the world is increasing, not because the United States is falling.
Many reject this resilience as senseless optimism and argue that US shares will soon succumb to the “dark circle” of 2025. But in my experience, the message from the markets is usually more correct. So it is worth finding out what the markets could see.
US shares Seem to float with historically high ratings about data that still show that Trump’s policy has not yet influenced inflation or growth in any sensible way. The great fear was that his constantly developing tariffs would drive inflation and slow growth. Instead, inflation is lower and growth higher than the consensus forecasts. The tariff income appears in the treasury coffers, but not much in the consumer prices, for reasons that are somewhat mysterious. Do foreign suppliers take up the costs or maybe there are US companies available to existing inventory?
In one way or another, US companies still have to have significant success. Most forecastists still demand profit growth to slower (to less than 8 percent), inflation in order to increase in the second half of this year to the growth of GDP growth (to around 1.5 percent). But the market Also pulls these projections off.
US companies buy their own stocks back at a pace of $ 4 billion per day. American retail investors are all at an unusually aggressive pace this year. About half of the US household assets are now being invested in shares -and breaks the record that was set during the Dotcom bubble from 2000. Although small investors often represent “stupid money”, their belief has been paying off so far. A new turn could be added to the old line – never against the US consumer. Never bet against the US retail investor.
In the meantime, foreigners are not a significant retreat of US shares or bonds, although they are threatened by new taxes on transfers and foreign investments, deportations and much more. This looks like a marriage that survives and is afraid of what could go hand in hand with changes.
As in previous bear markets, including that in the 2000s, the decline in the dollar has been regarded as an orderly adaptation in the last few months after a long overvaluation – not as a sign that America has difficulty financing its great deficits.
If it had been clear last year that the US deficits would not fall as expected, most analysts would be a new highlight – almost 7 percent of the GDP – in the direction of a new highlight – Most analysts would have predicted a bond market locations. Instead, the answer was subdued, with the bond decreased slightly this year.
For most observers, the Trump presidency has previously brought unimaginable tumult and even threatens to change the basic idea of America and its place in the world. But the stock market behaves as if nothing had changed. The same internal trends that dominated last year are involved.
AI mania has reached new heights, with a basket led by the USA with AI shares that break out at heights. The burgeoning story at the beginning of the year that the United States lost its lead against Chinese rivals such as Deepseek has faded and analysts talk about America again. The Americans seem to take over AI faster than they use digital technologies of the past, including the Internet itself. US companies use it faster than their foreign colleagues, including those in China. Of the top 10 KI platforms in the world, according to the number of users, eight Americans are led by Chatgpt.
The five best US technology companies continue to dominate and still make up almost 30 percent of the US stock markets’ value. In the meantime, small and medium-sized US shares remain such as for years, only now under a guide who promised to help these companies.
For the market optimists, AI promises a productivity miracle that could strengthen the economic growth of the United States and save it from increasing deficits and debts. They look at this rosy future, not the conversation about economic difficulties that can come later this year.
However, there are three options for how this buoyancy could break: The AI narrative changes again, since companies invest hundreds of billions of dollars in the AI infrastructure. Without knowing who benefits or when. Economists are more and more right for the risk of less growth and a higher inflation of tariffs. Or investors recognize that the obvious strength of the US consumers and companies is a Mirage -the flip side of the massive and increasing deficit of the US government.
Up to one of these scenarios, the US markets will probably continue to play and encourage Trump to believe that he is winning.
