Investing.com — Wells Fargo (NYSE: ) Investment Institute has maintained a positive view on the resilience of U.S. economic growth and market performance, a perspective that has guided its portfolio recommendations over the past several years.
The institute attributes this success to several factors, including aggressive tax cuts during the pandemic and government spending, which have positioned the US for a strong post-Covid recovery.
The concept of American “exceptionalism” is supported by both micro and macroeconomic forces. At the firm level, US firms are perceived as more innovative, technologically oriented and efficient compared to their international peers.
McKinsey & Co. estimates that American companies achieve a return on invested capital (ROIC) that is four percentage points higher than the European average. According to Wells Fargo, this advantage extends beyond technology companies to include strong financial and market performance in the US non-tech sector.
Structural supports such as innovation, immigration and proactive economic policies further strengthen the US economy.
“Economic strength is fueled by a favorable regulatory environment, ready liquidity in deep and efficient capital markets, and a culture that encourages innovation and entrepreneurship,” the institute’s report said.
The role of the US dollar as the primary currency in global trade and finance also plays a significant role in attracting foreign financing and investment.
Despite China’s dynamic technology sector, Wells Fargo explains that its performance is hampered by a quasi-market system with controls that can reduce its efficiency compared to the US market.
Moreover, China faces structural challenges, including a real estate slump, a shrinking population, local government debt and past overinvestment, which have dampened growth prospects.
Wells Fargo Investment Institute believes that the exceptionalism of the US will hold, outweighing the temporary impediments to growth and deeper structural problems in Europe and China. It suggests that the economic risks associated with trade and immigration policies can be neutralized by potential tax cuts and deregulation that will boost growth.
“The strengths of institutions that support financial market liquidity, transparency and efficiency are unlikely to disappear anytime soon,” the institute notes.
“Most importantly, the U.S. appears well-positioned to remain a leader in high-tech innovation and absorption based on its access to venture capital and other financing, its entrepreneurial culture, and other forces that support productivity-enhancing investment and economic growth.” potential,” it added.
In terms of investment implications, the prospect of continued US exceptionalism and a strong technology sector support a continued preference for the US market.
Wells Fargo believes that US technology will continue to outperform tactically in the short term and strategically in the long term, driven by continued digitization and innovative technologies.
As a result, the institute recommends a long-term overweight position in information technology, communications services and other technology-exposed sectors.
It also advises increasing international exposure through US multinationals in energy, materials and industrials, consistent with their view of continued US exceptionalism.
