america first - exceptionalism continues

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Watch our 2025 Outlook in full
America First means continued exceptionalism
The Trump administration's "America First" policy could help underpin US economic, earnings and market exceptionalism.  US economic growth is outpacing the UK and EU.  It benefits from higher energy prices and defence spending.  American dominance of technology sector means its corporate earnings in aggregate have been more resilient, relative to the rest of world and the UK.  Higher earnings growth has been rewarded with higher valuation multiples.  Given the levels of market concentration, selectivity and balance within US equities remains key.
Outlook for US economic growth remains robust
US political and economic policy, and the performance of both its economy and its markets continue to define the global landscape. The newly-elected Republican government brings with it a strong mandate, emphasizing economic nationalism and trade protectionism. With a renewed "America First" policy framework, the outlook for US economic growth, corporate earnings and equity markets remain robust.
The U.S. economy is expected to perform well in 2025, bolstered by domestic-focused policies and the competitive advantage it is afforded by an international trade environment that will be increasingly contested with Trump’s threatened tariff policy. The divergence between US and UK/European economic trajectories underscores this exceptionalism, with US economic and earnings growth accelerating while UK/European growth lags.
Remapping of European energy landscape boosts US LNG
Whilst the Russia-Ukraine war and related sanctions is bolstering the US Energy and Defence sectors, the remapping of European energy supply chains from piped Russian gas to shipped US LNG is an important shift from an energy security perspective, but the resulting inflation for manufacturers is hollowing out European industry - impacting the UK and Germany in particular.
UK equity market valuations gap remains
The much-debated focus around lower UK equity market valuations is a function of lower UK corporate earnings growth, in our view.  This has been the case both over the past decade, and looking forward.  Without an accelerating growth trajectory or reason for a valuation re-rating, there is a risk that the relatively lower valuations for UK equities persists.  We nonetheless recommend a low-moderate UK allocation as a useful diversifier, given the UK’s declining correlation with global markets.
US ecoomic growth, earnings growth, and valuation multiples have driven market growth
Dominance in technology has underpinned healthy corporate earnings in the US, relative to other regions. This earnings strength has supported higher valuation multiples for US equities.  Combined with favourable interest rate dynamics, this has propelled market outperformance.
US continues to set the pace for global equities
Over the past decade, cumulative returns for US equities have materially outpaced global and UK markets, a trend likely to persist.  We have to remain alert to anything that dislocate a richly-valued US equity market: agility from a sector and factor positioning perspective can be helpful in this respect.