Name: 'Sell America': Why the US Is Getting Downgraded
Uploaded: 2025-05-20T02:46:04.000Z
Duration: 11 min 19 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

When it comes to investments, there's no such thing as guaranteed returns.

Advanced passive voice

But the U.S. has, for years, been viewed as an exception.

The U.S. sits in a very special place in the global economy.

American exceptionalism is a concept that has been gaining traction because the only place where you could find growth was the United States.

Global investors have known that American markets are about as close to a sure thing as they can get.

Markets have enjoyed two consecutive years of double-digit percentage gains.

It's rooted in a concept that America has some sort of special sauce, that it's different in some capacity.

We are getting to a period of more protectionism and more difficulty to trade abroad.

We immediately saw a pretty stark reaction.

Tariffs rattle markets with a sweeping sell-off.

The simultaneous decline in the equity market, in the bond market, and in the U.S. dollar, all three of those together tell you that there's that sense of disquiet.

So what happens when the world's favorite money-making bet is no longer a sure thing?

When you're talking about American exceptionalism, you're talking about three pillars here.

You're talking about growth, liquidity, and rule of law.

These are the pillars upon which this American exceptionalism has supported itself for over two decades now.

Let's take a minute to drill down into each of these pillars.

First is growth, which is another way of saying the stock market.

U.S. companies are completely entangled with global growth, especially the tech ones.

If you take any of those big magnificent seven, as we call them, a very, very large part of their revenues is made abroad, not in the U.S.

What we've seen is from 2018 to 2024, something in the order of 120% increase in the S&P 500 versus a Eurostock 600 that was only up like 30% in that time frame.

The second pillar is liquidity, aka, can you get your money back in a hurry?

The dollar occupies a really special role in the global financial system.

It is the world's safe asset, the world's reserve currency.

No currency is as liquid as the U.S. dollar.

The dollar is involved in 90% of FX trades.

The dollar is also the global trading currency, right?

Almost everything is invoiced in dollars.

Third is the rule of law, which supports the safety and stability of the financial system.

And this is where U.S. treasuries and the bond market are especially important.

The U.S. exports that debt by selling bonds, little IOUs from the mighty U.S. government, backed up by its agencies, courts and Congress.

It's basically exporting this idea of rule of law, institutional stability.

Investors who are buying a U.S. treasury don't have to worry about credit risk.

And so it was that in April of 2025, we were hit with, well, this.

My fellow Americans, this is Liberation Day.

The day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again.

Global markets reeling, losses accelerating as the U.S. indices show a sea of red.

From retailers to car sellers to home builders to smartphone makers, virtually no sector spared from the tariff-induced sell-off.

Liberation Day seems almost like an indiscriminate, outright trade war with the rest of the globe.

We saw a lot of international investors sell their U.S. stocks.

You also saw American bonds selling off, which is something that is not supposed to happen.

If you're in the market right now, you're wondering where to hide.

And I can tell you at the moment, you can't hide in the bond market.

A sell-off in bonds, the likes of which we haven't seen since the pandemic.

Every single U.S. asset, whether it's bonds, stocks or currency, was dumped.

Part of the extra added uncertainty right now is we don't have a framework of where we're going.

But yeah, I saw last night where people were getting a little queasy.

The rule of law has definitely, definitely come under attack.

Simply, people don't know what the rules of the game are anymore.

And if there's any Achilles heel, that's the one.

The global financial system, it is not built for a world where stocks are falling, where bonds are falling and the dollar is also falling.

This puts the American and therefore the global economy in a very precarious place, something the markets are particularly averse to.

When you have those kinds of ideas that are introduced into a system, but they're introduced in a violent and aggressive way, then you're going to have a lot of volatility.

A massive rally today spurred by a shift in White House policy.

You have the Nasdaq 100 seeing the biggest gain since 2008.

You're going to go down to a 10 percent baseline tariff for them.

And China will be raised to 125 due to their insistence on escalation.

Even if there's like a complete reversal, confidence is damaged.

And when confidence is damaged, people start to switch their portfolio to other assets.

While Trump's tariffs may have put American exceptionalism in focus, the concerns are longstanding.

The problem was the very heavy concentration of the U.S. economy into these Magnificent Seven or those big tech stocks.

And as an investor, it's a problem because you can't have so much exposure to such a small number of stocks.

Overexposure to the Magnificent Seven was just part of the uncertainty.

Moves away from bonds and the dollar also predate Trump's policies.

Before Trump, we had seen some signs of investors backing away from U.S. treasuries.

A lot of central banks have been diversifying into gold, things like that.

But when the stock market started crashing, we did not see that flight to safety into dollar assets.

We saw investors actually retreat from a lot of those dollar assets.

We've seen gold hitting a new record on safe haven demand.

And we can pin some of that move on Donald Trump.

But really, de-dollarization has been this long running talking point in the markets for decades now.

But we have to remember that U.S. markets, they are huge and we don't necessarily have alternatives that can quickly absorb the degree of a major global disinvestment of the United States.

The data supports this. 88 percent of all FX trades, 70 percent of foreign currency debt issued, 59 percent of the world's currency reserves, 54 percent of all export invoicing and 47 percent of the world's interbank FX transactions all use the U.S. dollar to this day.

And so it's really difficult to see what the replacement, what the substitute would actually be for the U.S. dollar.

Time and again, when these de-dollarization concepts come up, at the end of the day, people are stuck with the dollar.

However, de-dollarization in terms of your equity portfolio, that's what we're seeing happening right now as a result of the loss of American exceptionalism.

And so it's foreign stock markets that may be the beneficiaries.

Outside the U.S., there's a lot of potential winners.

But one that has been the big focus is Europe.

The German stimulus was kind of a game changer and the monetary policy is much more accommodative in Europe compared to the U.S.

So companies are refinancing themselves at a much lower rate and they are benefiting from a huge fiscal stimulus.

While in the U.S., you have the complete opposite.

You have a central bank which is kind of stuck between inflation tensions and a government which is reducing spending and doing everything it can to, like, keep finances tight.

It's not the first time that we have seen a crisis of confidence.

Going back to the 70s, to Nixon administration, when you have a confidence shock where the U.S. upended the gold standard.

Now we have a new world, fortunately, a much better world economically.

We did have the subprime mortgage crisis in 2008 and the U.S. has come back.

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'Sell America': Why the US Is Getting Downgraded

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