US credit: The case for American exceptionalism
Why a combination of government policy, innovation and macro tailwinds make us optimistic for the asset class.
The below is the introduction to our major thought leadership piece ‘US credit: The case for American exceptionalism’. To read the whole article, click here.
Historically, the US economy has reacted to higher interest rates in predictable ways, and has been generally correlated with other developed economies – especially Europe and Japan. However, post-pandemic, these patterns have generally broken down and it has charted its own path.
Between 2010 and 2023, US GDP grew 34%, much faster than the European Union’s 21% and the eurozone’s 18%[1]. The US is expected to meaningfully outperform other nations in terms of GDP, according to the OECD, and we expect it to continue its run of outperforming the world at the asset price level for the foreseeable future . While many factors have been in play, one primary contributor has been labour productivity – during the same 13-year period, this went up in the US by 22%, but only increased by 5% in the eurozone[2].
The US technology sector, especially firms associated with the new wave of artificial intelligence (AI) solutions, has been the most productivity-enhancing component. American corporate profitability sits at an all-time high as a percentage of GDP as consumers have been largely yield-insensitive. This has allowed rates to remain higher for longer – thus leading to higher credit yields relative to most other markets. Compounding effects over time have resulted in a larger, more diversified and more liquid market.
This note outlines the case for further US exceptionalism – and the investment rationale for allocations to US credit over other developed economies.
[1] Source: Bloomberg as at 14 January 2025
[2] Source: OECD, December 2024
