Equal Housing Lender. Bank NMLS #381076. Member FDIC.
The makings of U.S. economic exceptionalism
A look back
Economic growth comes from the accumulation of labor and capital. The post-WWII economic boom in the U.S. rode a wave of technological progress and capital investment. The undeniable and most relevant fact is the U.S. has been the outperformer among developed economies for the past half-century. Can this economic dominance continue in the face of building risks?
20%–25%
THE U.S. HAS MAINTAINED A ROUGHLY 20%–25% SHARE OF THE WORLD ECONOMIC STAGE OVER THE PAST 50 YEARS.
Sources: IMF, Wilmington Trust. Data as of October 2021.
$5.3T
U.S. DIRECT FISCAL STIMULUS TOPPED ALL OTHERS WITH $5.3T IN NEW SPENDING, HITTING 26% OF GDP.
Fiscal Monitor Database of Country Fiscal Measures in Response to the COVID-19 Pandemic, International Monetary Fund, as of October 2021.
Dimensioning the U.S. and world economies
Compared to Europe, Australasia, East Asia, and emerging markets, the U.S. has a leading edge when it comes to the drivers of economic exceptionalism.
1
Growth pillars
The factors to compete globally include capital markets, infrastructure, demographics, education, and labor flexibility.
2
Policy framework
Fiscal responsiveness helped nations weather the pandemic. The downside is its impact on the debt-to-GDP ratio.
3
Innovative capacity
Economies with strong digital infrastructure and robust research & development are well placed to compete in the global market.
Differentiating drivers of post-Covid-19 exceptionalism
The drivers of U.S. economic exceptionalism were in place prior to the Covid crisis, and the U.S. recovery was more rapid due to what was enacted across three measures:
- After the pandemic, the U.S. emerged as a leader in labor flexibility, which can be attributed to the ease for workers to change jobs and the ability of firms to restructure their workforce as needed.
- The U.S. response to direct fiscal stimulus exceeded all others with $5.3T in new spending, amounting to 26% of GDP.
- The U.S. dominated in its ability to innovate. It was the key contributor to the development of mRNA technology and becoming a leader in deploying vaccines. Outside the pharma sector, innovation resulted in a shift to online transaction capabilities and increased entrepreneurship.
Fiscal Monitor Database of Country Fiscal Measures in Response to the COVID-19 Pandemic, International Monetary Fund, as of October 2021.
Luke Tilley
Chief Economist
LOOKING AHEAD
We expect the U.S.’ competitive advantages to power continued outperformance over the next 12 months, though there are risks on the horizon.
Watch our 2024 Capital Markets Forecast Highlights to hear Chief Economist Luke Tilley talk about what he sees for the year ahead.
Wilmington Trust Investment Advisors, Inc. (WTIA), a subsidiary of M&T Bank, is an SEC-registered investment adviser providing investment management services to Wilmington Trust and M&T affiliates and clients. Wilmington Funds are entities separate and apart from Wilmington Trust and M&T Bank.
Registration with the SEC does not imply a certain level of skill or training. Additional information about WTIA is also available on the SEC's website at adviserinfo.sec.gov.
Wilmington Trust Investment Advisors, Inc.’s Capital Markets Forecast is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a recommendation or determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the investor’s objectives, financial situation, and particular needs. The investments or investment strategies discussed herein may not be suitable for every investor. The material is not designed or intended to provide legal, investment, or other professional advice since such advice always requires consideration of individual circumstances. If legal, investment, or other professional assistance is needed, the services of an attorney or other professional should be sought.
The forecasts presented herein constitute the informed judgments and opinions of Wilmington Trust about likely future capital market performance. Forecasts are subject to a number of assumptions regarding future returns, volatility, and the interrelationship (correlation) of asset classes. Assumptions may vary by asset class. Actual events or results may differ from underlying estimates or assumptions, which are subject to various risks and uncertainties.
Wilmington Trust is not authorized to and does not provide legal or tax advice. Our advice and recommendations provided to you is illustrative only and subject to the opinions and advice of your own attorney, tax advisor or other professional advisor.
Some investment products may be available only to certain “qualified investors”—that is, investors who meet certain income and/or investable asset thresholds. Any offer will be made only in connection with the delivery of the appropriate offering documents, which are available to prequalified persons upon request.
References to the company names mentioned in this material are merely for explaining the market view and should not be construed as investment advice or investment recommendations of those companies. No assurance can be given as to actual future market results or the results of Wilmington Trust’s investment products and strategies. The estimates contained in this presentation constitute Wilmington Trust’s judgment as of the date of these materials and are subject to change without notice. The information in this presentation has been obtained or derived from sources believed to be reliable, but no representation is made as to its accuracy or completeness.
Investment products are not insured by the FDIC or any other governmental agency, are not deposits of or other obligations of or guaranteed by Wilmington Trust, M&T, or any other bank or entity, and are subject to risks, including a possible loss of the principal amount invested.
Securities listed or mentioned are provided for illustrative purposes only and are not intended to be representative of current recommendations or holdings. It should not be assumed that these securities were or will be profitable.
Investing involves risk and you may incur a profit or a loss.
Past performance cannot guarantee future results. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful.
Benchmarks and financial indices are shown for illustrative purposes only. Such benchmarks and indices are not available for direct investment, and their performance does not reflect the expenses associated with the management of an actual portfolio, the actual cost of investing in the instruments that comprise it, or other fees. Benchmarks and financial indices referenced herein are representative of large and small domestic and international stocks and bonds, each with unique risks.
Third-party trademarks and brands are the property of their respective owners. Third parties referenced herein are independent companies and are not affiliated with M&T Bank or Wilmington Trust. Listing them does not suggest a recommendation or endorsement by Wilmington Trust.