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How AI could bring back American exceptionalism
How AI could bring back American exceptionalism

Axios

time6 days ago

  • Business
  • Axios

How AI could bring back American exceptionalism

Investors are flocking to Europe, not for vacation, but for returns. But without the market power of artificial intelligence companies, they may have to quickly come back to America. Why it matters: Much of Europe's outperformance this year stems from a weakening dollar, not stronger fundamentals. Without the AI boom that is fueling the resurgence in U.S. stocks, the old world may struggle to keep up. What they're saying: " People want to be in the U.S. markets in the AI trade," Stuart Kaiser, head of U.S. equity strategy at Citi, told Axios. "It's a market you have to be involved in." Zoom out: The American stock market has outpaced gains in global equities for the last 15-plus years. Europe saw a 17.9% total return in U.S. dollar terms in the first half of 2025, but just 8.8% in local currencies, according to Vanguard. That gap signals the rally was largely driven by currencies and requires a catch-up on fundamentals to continue driving its growth. By the numbers: Nvidia alone is worth an amount equal to 14% of the total U.S. GDP, according to Robert Ruggirello, chief investment officer of Brave Eagle Wealth Management. "Not owning it is…painful," he wrote in a note. Of note: The European index was outperforming the S&P 500 for most of 2025 until recently. S&P 500 tech stocks are now outperforming both the broader U.S. and European markets. Zoom in: U.S. firms are embracing AI at scale. Europe is behind. European firms lag U.S. peers by 45% to 75% on AI adoption, according to McKinsey research last fall. Over the past 50 years, the U.S. has created 241 companies worth over $10 billion from scratch, while Europe has created just 14, Andrew McAfee of MIT told the Wall Street Journal. Between the lines: The slower AI momentum in Europe reflects regulatory pressure, higher corporate taxes, and fragmented markets, barriers the U.S. lacks. Even European AI successes often funnel into U.S. markets: DeepMind, the British AI firm behind Gemini, sold to Alphabet in 2014. Reality check: Strategists still see growth opportunities in Europe and beyond, given fiscal stimulus and potentially better economic growth. Trends like the shift to global assets can "last a lot longer than you think," Ryan Detrick, chief market strategist at the Carson Group, told Axios. We're only about seven months into this rotation. The bottom line: AI is powering the American stock market. If you're seeking diversification, that may be hard to find in the U.S. indices.

Wall Street only cares about one tariff deal today
Wall Street only cares about one tariff deal today

Axios

time24-07-2025

  • Business
  • Axios

Wall Street only cares about one tariff deal today

The stock market barely moved off the trade deal with Japan this week, as market sources said that's the new investor playbook for tariff headlines: Ignore them unless it's about China. Why it matters: The stock market, which is up 27% since the April 8 lows, has already priced in trade deals. The only thing that could derail that is a negative development in the trade relationship between the U.S. and China. What they're saying: "Unless the China stuff gets really ugly, I think the market will treat these as minor hiccups and potential buy the dips," Stuart Kaiser, head of U.S. equity strategy at Citi, told Axios. By the numbers: The tariff rate on China matters because companies in the stock market are heavily exposed to China as both a supplier and consumer. Annual S&P 500 revenue from China sits at $1.2 trillion, Apollo chief economist Torsten Sløk told Axios. That figure is roughly four times the U.S. trade deficit with China. The cost of goods sold rose over 15% from 2015 to 2019, in part due to the implementation of tariffs in President Trump's first term. That increase in costs can pressure profits, and therefore stock prices. Catch up quick: Kaiser noted the pattern in Trump's need for "an adversary," first Japan and now Europe. By that same logic, the trade deal with Japan may serve as a framework for what may happen with any potential European deal, and thereafter, any deal with China.

What the June CPI data could mean for Fed rate cuts
What the June CPI data could mean for Fed rate cuts

Yahoo

time14-07-2025

  • Business
  • Yahoo

What the June CPI data could mean for Fed rate cuts

Stocks (^GSPC, ^IXIC, ^DJI) have rallied, but traders are bracing for Tuesday's Consumer Price Index (CPI) report to see if tariffs are starting to show up in inflation data. Yahoo Finance Markets Reporter Josh Schafer joins Morning Brief to outline what to watch in the June CPI print and how it could shape expectations for future Federal Reserve interest rate cuts. To watch more expert insights and analysis on the latest market action, check out more Morning Brief here. We've been talking about trade, and some of these assets that are not really showing the effects of what's going on in trade. Now, tomorrow, we've got a CPI report, and the question remains, are we finally going to start to see more of the tariff effect being felt in those numbers? Yeah, Julie. So the answer from economists would be yes, right? We're expected to see a little bit of a tick up in that Consumer Price Index for June. Economists expect that report to show prices increased 2.9% on a core basis, which would exclude food and energy. That's up from 2.8% seen in May. So a slight uptick there. But what's important here again, as we always talk about with markets, is sort of where expectations lie, right? That's consensus. Consensus is expecting prices to tick up a little bit. So, Citi's head of trading, Stuart Kaiser, pointed out, "Well, consensus is already expecting this pick up a little bit. It probably leads to no fed rate cut in June. But at this point, the market's only pricing a 7% chance of a Fed rate cut in, or sorry, Fed rate cut in July." So at this point, that hasn't been some of the key things that's really backing this rally. So Kaiser sort of argues, "Well, maybe the rally can just continue, even if the data get a little worse from here, because the data are expected to get worse." You can see this in something like Citi's economic surprise index, which takes a look at how data is coming in versus expectations. So you can see on your screen here, right as we got into July, data has started to beat expectations, meaning the market has started to understand that perhaps the data won't be as good. And so the data is starting to come in a little bit better than feared, I would put it. Not necessarily great, but again, better than feared. And so if the market is ready for that reaction, and things continue to come in in this slightly not as good expectation form, some strategists, like Kaiser, are arguing that maybe it won't be that big of a problem for stocks. Well, and of course, Kaiser's not the only one who is bullish here, right? We, I mean, take your pick almost at this point. You're not, it's it's it's getting more and more difficult to find bears out there. And Josh, another example of someone raising their forecast is Lori Calvasina over at RBC, who did that in a note over the weekend. Well, Julie, I'll I'll flip it on you a little bit though, right? So Lori's new target that she moved over at RBC is to 6,250. Take a look at where the S&P 500 is trading on your screen, right? She's saying it's gonna be flat over the next six months. And so essentially what she's saying is not that there won't be rallies, but she's projecting more chop. She pointed to the fact that momentum trade we've talked about a lot over the last month has started to slow down. So some of those high fliers are not necessarily leading the market higher. She pointed to, of course, the ongoing Trump tariff turmoil. That was something that Yardeni also pointed out. He felt like at this point, for his 6,500 target, we'd be past this Trump back and forth, and we're not. So I think really the feeling is, yes, maybe we get an end of year rally, but I'm not sure necessarily over the next month and a half on a tactical basis. Everyone's bullish right now. It seems to be a little bit of wait and see, at least until we start to figure out some of these headwinds and maybe get a little bit further into August. Yeah, definitely. There is some consensus around that choppiness, uh, for example, even if some people are more bullish and bearish when all is said and done. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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