On American Exceptionalism

For the last fifteen years, the easiest, laziest, and—let's be honest—most mind-numbingly profitable trade in the world has been to simply bet on America. You didn't need a thesis. You didn't need to read a 10-K. You just needed to buy the index, go to lunch, and watch the numbers go up.

This trade was built on a story, a powerful and persistent myth sold in every pitch deck from Wall Street to Sand Hill Road: the myth of American Exceptionalism.

The story goes something like this: The United States is special. It’s not just another country; it’s a divinely-sanctioned, constitutionally-brilliant engine of freedom and innovation that stands apart from the tired, sclerotic old world. This narrative, born centuries ago from Puritans dreaming of a "city upon a hill," became the cultural bedrock for the most dominant financial empire in human history. It justified everything from westward expansion to the post-war Bretton Woods agreement that hardwired the U.S. dollar into the global financial system’s source code.

It’s a great story. A compelling story. And as an investment thesis for the next decade, it’s utterly, fundamentally broken.

The lazy money has been made. That trade is over.

Let's Talk About The Numbers, Shall We?

The sheer scale of U.S. market dominance, particularly since the Global Financial Crisis, has been staggering. It’s the kind of run that makes people believe in a new paradigm.

From the ashes of 2008 through today, U.S. equities have outpaced their developed international peers by a cumulative 430%. Let that sink in. It’s not just a win; it’s a rout. This gravitational pull has warped global benchmarks, with U.S. companies now making up a comical 70% of the MSCI World Index, up from a more balanced 50/50 split a decade ago.

So, what fueled this god-tier run? The bulls will give you a list of perfectly reasonable-sounding drivers:

• Superior Earnings Growth: S&P 500 earnings grew at 6.3% annually since the crisis, literally four times faster than the rest of the developed world.
• Sectoral Dominance: The U.S. market is loaded with high-growth tech, which makes up 41% of its value compared to just 19% for non-U.S. markets. We own the future, or so the story goes.
• Valuation Expansion: Investors have been willing to pay an ever-increasing premium for a dollar of American earnings. Confidence has been, to put it mildly, high.
• A Raging Bull Market in the Dollar: The buck has been on a tear, juicing returns for U.S.-based investors and making foreign assets look pathetic in comparison.

Looks impressive, right? An open-and-shut case.

But this is the part of the story where you have to pop the hood. And what you find underneath is deeply unsettling.

The Whole Damn Thing Is A Lie

The narrative of broad-based American corporate supremacy is a fiction. It's a marketing slogan built on the performance of a tiny handful of stocks.

You know the names. The "Magnificent Seven."

Research shows that if you strip out these few mega-cap tech behemoths, the other 493 companies in the S&P 500 have seen their earnings stagnate over the last three years.

Read that again.

The rest of the S&P 500 has actually underperformed its international peers.

The "American Exceptionalism" you’ve been buying isn’t an entire market of world-beating companies. It’s a dangerously concentrated, top-heavy bet on a few firms that have already achieved global dominance. The foundation of this historic run is far narrower, and far more fragile, than the headline numbers would have you believe.

And this is where it gets interesting. Because market leadership isn't permanent. It's cyclical. And we are living through a cycle that is long in the tooth, stretched to the point of absurdity. Historically, these leadership cycles between the U.S. and the rest of the world last about eight years. The current cycle of U.S. dominance is now over 14 years old.

The party is ending. The reversion is coming.

The Cracks in the Foundation

So why is the cycle turning now? Because the structural advantages that propped up this whole trade are beginning to buckle under the weight of America’s own fiscal insanity and geopolitical hubris.

Let’s start with the national credit card.

The U.S. national debt just blew past $37 trillion, a figure larger than the entire country’s annual GDP. For decades, this didn't matter. America could print money to pay its bills because the rest of the world had no choice but to buy its debt, a perk the French famously called the "exorbitant privilege."

But that privilege is being quietly, methodically revoked.

And here is the single most important chart you’re not looking at: foreign ownership of U.S. debt. At its peak, foreign investors held nearly 50% of publicly-traded U.S. Treasurys. Today, that number has collapsed to around 30%.

Think about what that means. While the absolute dollar amount has grown, U.S. debt issuance is now growing so much faster than foreign demand that the share held by our so-called "creditors" is in freefall. Central banks in China, Japan, and elsewhere are not a captive audience anymore. They are diversifying. They are quietly heading for the exits.

This is the slow, grinding beginning of de-dollarization. Don't listen to the alarmists; the dollar isn't going to collapse tomorrow. Its plumbing is too deeply embedded in the global system. But its undisputed reign is over. Its share of global central bank reserves has already fallen from over 70% at the turn of the century to a two-decade low of 58%.

Why? Because the U.S. has spent the last decade weaponizing the dollar through sanctions, transforming it from a neutral global utility into a tool of foreign policy. You can't blame the rest of the world for wanting an alternative. In its effort to project short-term power, the U.S. is systematically destroying the long-term trust that grants it that power in the first place.

It’s the classic late-stage empire move. We’ve seen this movie before with the Dutch in the 18th century and the British in the 20th. A great power shifts from making things to financing things, runs up unpayable debts, and overextends its global commitments until the whole thing becomes too expensive to maintain. The parallels are too obvious to ignore.

So, What's The Trade?

Now, this is not a call to dump every U.S. stock you own and flee to a bunker. Let's be serious. The U.S. remains the home of venture capital, ferocious innovation, and the deepest, most liquid capital markets on Earth. That isn’t changing overnight. The death of American financial primacy will be a long, slow, multi-decade process, not a sudden event.

But the investment implications are profound and immediate.

The primary takeaway is that "home bias" is now a catastrophic portfolio risk. The lazy, passive strategy of just being overweight in your home market—a strategy that has rewarded U.S. investors handsomely for 15 years—is now a bet against the inevitable forces of historical reversion.

This is the "Great Rebalancing." It’s a structural shift toward a more multipolar world where investment returns will be more evenly distributed. It means the next decade will likely be defined by a structurally weaker U.S. dollar and the convergence of returns between U.S. and international equities.

To do this right, your playbook has to change.

1. Genuinely Diversify. This means strategic, meaningful allocations to non-U.S. developed and emerging markets that stand to benefit from a weaker dollar and supply chain realignment.
2. Embrace Active Management. The days of winning by simply buying the S&P 500 are over. The index itself is a poorly constructed, top-heavy momentum fund. Generating alpha will require skilled stock selection and sophisticated currency management.

The American Century of investing delivered a hell of a party. But the lights are coming on, and the cleanup is about to begin. The Global Century of investing requires a passport.

Act accordingly.