A Muted Celebration

The United States commemorated its semiquincentennial on Saturday, the 250th anniversary of the signing of the Declaration of Independence.

As usual, the 4th of July was celebrated with fanfare, fireworks and festivities, but this time there was also quite a bit of introspection. A nation that was founded (imperfectly) on principles of democracy, freedom and the rule of law is questioning whether those still hold. It seems more divided along political lines than at any time since the Civil War. People are stuck in social media echo chambers in other countries too, but the rigid two-party political system makes it worse in America.

Donald Trump, the 47th president, is both a cause and symptom of the unease. Unlike his predecessors, he has delighted in breaking with long-established norms and rewriting the rulebook. His political genius was tapping into deep-seated economic, social and cultural anxieties, including rising inequality, declining social mobility, deindustrialisation, “deaths of despair” from drug abuse and suicide, and immigration. Like most populists, however, he has been long on scapegoating and attacking opponents, while short on materially helping his ordinary supporters, though close associates have done well. While Trump is unique in background and character, it doesn’t mean Trumpism will go away when he eventually moves on (he turned 80 a few weeks ago).

However, there is also still so much to applaud. The US remains the world’s most powerful country, a leader in technology and innovation, including artificial intelligence, while its film, TV and music industries are unrivalled in their worldwide reach. For global investors, it is still the one market no one can ignore, not only because of its size and liquidity, but also the way its ups and downs influence the rest of the world. Indeed, tor most international investors, understanding the direction of the US economy, interest rates and currency matters more than developments in their own countries. There has always been an irony in Trump’s “Make America Great Again” mantra: the US was already doing much better than other advanced countries based on purely economic metrics since the 2008 financial crisis, and especially since the pandemic.

Chart 1: Real GDP per head of G7 countries

Source: OECD

The one area where the US lags other advanced countries is a comprehensive social safety net. However, the Republican Party, including under Trump, continue to undermine what little, relatively speaking, there is.

Wall Street party
In terms of the equity market, probably Trump’s favourite barometer of success, there is also little need for greatness to be restored.

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