LIVE MARKETS-US exceptionalism is not dead - Bernstein

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US EXCEPTIONALISM IS NOT DEAD - BERNSTEIN

The recent unwinding of "Trump trades" has sparked debate among investors about whether the shift in sentiment is a tactical blip or a strategic change in the market narrative.

According to Inigo Fraser-Jenkins, Co-Head of Institutional Solutions at Bernstein, the move is "a rotation rather than a true freaking-out about risk assets".

While the outperformance of European stocks has led some to declare U.S. exceptionalism is dead, Fraser-Jenkins disagrees, saying this reaction "betrays a misunderstanding of the phrase".

"Any exceptionalism of the U.S. should not be understood as a tactical proposition that can indeed change with sentiment, the cycle and policy pronouncements".

The real exceptionalism of the US is strategic in nature, he says - based on its favourable demographics, structurally higher level of profitability, geographic security of supply chains, the scale of its home market and the dollar's reserve status.

"These structural forces remain in place, so our strategic position remains overweight US assets. Tactically, however, there is a different story," he says.

The strong consensus against European assets at the start of the year was "striking" and it's begun to reverse, he says, pointing to the $600 billion of flows into U.S. stocks and $60 billion outflow from European equities over the prior 12 months.

While the reversal has been modest so far, with a $17 billion European inflow and $45 billion U.S. inflow over the last month, Fraser-Jenkins believes that "this resetting of the consensus position may have further to run".

(Danilo Masoni)

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