"American Exceptionalism" faces a test: Pressures on US debt safe haven status, US dollar hegemony challenged by the euro.

Scale and advantage are not always directly proportional, but in the global investment field, the correlation between "big" and "strong" is evident. The U.S. financial system operates like an independent planet, with its strong financial gravity allowing American companies and government to continuously access low-cost capital. This capital advantage not only reduces operating costs for companies but also gives them competitive barriers and excess return capabilities, thereby forming a virtuous cycle that attracts global capital. What is the "U.S. Exceptionalism"? Economists refer to this unique allure as the "U.S. Exceptionalism," a concept stemming from political theory's "American beacon" idea, which portrays the U.S. as a global arbitrator of democratic freedom. However, during Donald Trump's second term, measures such as escalated trade protectionism, intensified conflicts within the justice department, and challenges to the independence of the Federal Reserve have caused investors to reassess the U.S.'s position as an investment haven. Recent trends like a weakening dollar, fading allure of U.S. Treasuries as a safe-haven, and global central banks increasing their gold holdings seem to confirm this shift. Nevertheless, the U.S. stock market continues to reach new highs, demonstrating robust resilience. The definition of "U.S. Exceptionalism" is subject to various interpretations: some focus on its asset performance and the delinking phenomenon from global markets, indicating that U.S. bonds and stocks have seen long-term strength exceeding historical valuation expectations; others attribute it to institutional advantages, including efficient capital markets, innovative tech ecosystem, business-friendly environment, and tax cuts policy pushed during Trump's first term. The independence of the U.S. commercial arbitration system, pragmatic pro-business policy-making, coupled with robust economic data releases, collectively shape investor confidence. How is the reality manifesting? Data confirms this uniqueness: the U.S. bond market's total size has reached 29 trillion USD, accounting for 40% of global fixed-income assets; the total market value of U.S. stocks at 65 trillion USD dominates global stock markets, with its weight in the MSCI Global Index climbing from less than 50% after the 2008 financial crisis to nearly 70%. Over the past decade, U.S. corporate earnings growth has exceeded that of other regions significantly, with S&P 500 constituent earnings per share doubling, outperforming Europe's STOXX 600 index twofold, and stock buyback mechanisms strengthening shareholder return advantages. Are there signs of threats to the "Exceptionalism"? Threat signals have begun to emerge. The Trump administration's plans to implement historically high tariffs on imported goods have sparked market repricing of economic risks. In April, traditional safe-haven assets like U.S. Treasuries surprisingly fell in price alongside risky assets; the 30-year U.S. Treasury yield broke the 5% mark at the end of May, reaching a nearly two-decade high, indicating that foreign investors may adjust their holdings due to concerns of tariff-induced recession. Though Trump has suspended some tariff plans, his ongoing policy of imposing over 30% tariffs on China, combined with tax cuts delays, expanded defense spending, etc., continue to heighten market concerns about the sustainability of federal debt. If there is a contraction in U.S. Treasury demand leading to higher yields, it will further raise government financing costs, creating a vicious debt-interest rate spiral that could ultimately weaken the dollar's status. In addition to fiscal and policy risks, the polarization and politicization of U.S. politics also cause concerns. Trump's pressure on the Federal Reserve to lower interest rates has undermined market confidence in the independence of monetary policy; his "America First" foreign policy that shuns multilateral consensus is seen as a challenge to the traditional international order. These factors collectively impact the image of the U.S. as a stable investment destination. Is Trump really driving away foreign investors? Currently, there is no clear evidence of large-scale foreign capital withdrawal: in April, foreign investors' holdings of U.S. Treasuries remained near historical highs, with foreign governments continuing their net purchases of long-term U.S. bonds; by the end of June, the S&P 500 index reached new highs again, with U.S. equity funds attracting $164 billion in inflows since the beginning of the year, surpassing Europe's $46 billion. However, market sentiment has subtly changed, with surveys showing an increase in the percentage of investors who believe that global stock markets will outperform U.S. stocks in the next five years; the U.S. dollar index fell by 11% in the first half of the year, marking its worst performance since the Nixon era in 1973, even reaching a three-year low amid tensions in the Middle East, with 31% of respondents stating they are reducing their USD holdings, hitting the most pessimistic level in twenty years. Changes in market structure are also worth noting. Currently, the average P/E ratio of S&P 500 constituent stocks is 50% higher than that of the MSCI Global (ex-U.S.) Index, compared to just 10% in 2015, indicating that investors need to bet on sustained earnings growth exceeding expectations for U.S. companies. However, the "big seven" tech companies contribute to over 70% of the profit growth in the S&P 500, and the reality of their further dominance by 2025 suggests that risk-averse fund managers may lean towards diversifying their holdings. Meanwhile, Germany intensifies military and infrastructure borrowing, and China's economy stabilizes under the drive of artificial intelligence, providing more choices for global capital. What lies ahead? Regardless of the outcome of the November elections, the investment logic of "TINA (There Is No Alternative)" is facing a test. Some strategists see this as an opportunity to rebalance portfolios, with even U.S. companies starting to increase issuance of euro-denominated bonds as a hedge against policy risks. The Citi Macro team points out that the euro may become the preferred choice for long-term diversification of USD risks. The controversy surrounding the "U.S. Exceptionalism" also touches on the dimension of social fairness: the implicit logic that "market prosperity will inevitably benefit the people" is being challenged. Data shows that from 1979 to 2019, the after-tax income of the top 1% in the U.S. has grown by over 200%, while the middle 60% group has seen a mere 45% increase, and the bottom 20% group has experienced less than 30% growth. As the U.S. stock market continues to hit new highs, a January poll shows that Americans' satisfaction with life has reached a historic low. Tom Stevenson, trading director for European, Middle Eastern, and African stocks at Fidelity International, holds a different view. He emphasizes that the U.S. still possesses structural advantages: continued labor force growth, corporate profit margins doubling and staying high since the financial crisis, becoming a net energy exporter in 2019 for security, and a homogenous massive domestic market compared to fragmented Europe. These factors together support the long-term competitiveness of the U.S. economy.