Macroscope | Coronavirus recovery: why markets are still ‘America first’ despite Trump’s absence

America has regained its appeal in 2021 as a confluence of domestic and external factors renews global investors’ appetite for US assets

While concerns about overheating are warranted, they pale in comparison with the vaccine caution and fiscal prudence undermining recovery elsewhere

Reading Time:3 minutes

The Fearless Girl statue stands in front of the New York Stock Exchange on March 23. Photo: AP

Published: 12:30am, 26 Mar 2021Updated: 2:59am, 26 Mar 2021

Ever since the 2008 financial crisis, stock markets in the United States have outperformed the rest of the world. While the benchmark S&P 500 index has soared nearly 460 per cent since the beginning of 2009, the MSCI All Country World Index ex US – a gauge of global equities excluding US shares – has risen around 100 per cent.

Yet, for the first time in more than a decade, the period of “American exceptionalism” in markets appeared to wane last year. The combination of more attractive valuations overseas, former US president Donald Trump’s gross mismanagement of the Covid-19 pandemic, the plunge in the US dollar and expectations that a vaccine-fuelled recovery would benefit assets outside the US seemed to favour other regions, even Europe at one point.

However, since the beginning of this year, America has regained its appeal. A confluence of domestic and external factors has renewed global investors’ appetite for US assets.

First, the Democrats’ control of Congress has strengthened President Joe Biden’s hand in implementing his ambitious economic agenda. The enactment earlier this month of a US$1.9 trillion Covid-19 relief package – which amounts to 9 per cent of annual GDP – will turbocharge America’s recovery, and it could be followed by a further US$3 trillion in spending on infrastructure, clean energy and education.

Second, the vaccine roll-out has accelerated in the past two months, with more than a quarter of Americans having now received at least one shot. Improvements in production and more effective mobilisation of federal resources have allowed the Biden administration to set a May 1 deadline for every adult to be eligible for vaccination.

The US, which suffered more Covid-19 deaths than any other country, is now overseeing one of the fastest vaccination programmes in the world.

.css-1m2rp1p{color:#34b8b5;}Macroscope | Coronavirus recovery: why markets are still ‘America first’ despite Trump’s absence

Macroscope | Coronavirus recovery: why markets are still ‘America first’ despite Trump’s absence