The mother of all bubbles

THE idea of America as an exceptional nation, superior to its rivals and therefore destined to lead the world, seems passe to most observers. In political, diplomatic and military circles, the talk is of a dysfunctional superpower, isolationist abroad and polarised at home. But in the investing world, the term “American exceptionalism” is hotter than ever.   

United by faith in the strength of US financial markets and their capacity to keep outperforming all other economies, global investors are committing more capital to a single country than ever before in modern history. The US stock market now floats above the rest. Relative prices are the highest since data began over a century ago and relative valuations are at a peak since data began half a century ago.

As a result, the US accounts for nearly 70 per cent of the leading global stock index, up from 30 per cent in the 1980s. And the US dollar, by some measures, trades at a higher value than at any time since the developed world abandoned fixed exchange rates 50 years ago.