Investing.com– Wells Fargo (NYSE:) Investment Institute has maintained a positive stance on the resilience of U.S. economic growth and market performance, a perspective that has guided its portfolio recommendations over the past few years.
The institute attributes this success to several factors, including aggressive pandemic-era tax cuts and government spending, which have positioned the United States for a strong post-COVID recovery.
The concept of American “exceptionalism” is supported by both micro and macroeconomic strengths. At the business level, U.S. companies are perceived as more innovative, technology-oriented, and efficient compared to their international counterparts.
McKinsey & Co. estimates that US companies achieve a return on invested capital (ROIC) four percentage points higher than the European average. According to Wells Fargo, this advantage extends beyond technology companies and also includes 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 strengths have been fostered by a favorable regulatory environment, liquidity available in deep and efficient capital markets, and a culture that encourages innovation and entrepreneurship,” the institute's report states.
The US dollar's role as the primary currency in global trade and finance also plays an important 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 harm its efficiency compared to the US market.
Additionally, China faces structural challenges, including a slump in the real estate sector, a declining population, local government debt and past overinvestment, which have affected growth prospects.
Wells Fargo Investment Institute believes American exceptionalism will persist, overshadowing temporary headwinds to growth and deeper structural problems in Europe and China. It suggests that the economic risks associated with trade and immigration policies can be offset by potential growth-enhancing tax cuts and deregulation.
“The institutional strengths that support the liquidity, transparency and efficiency of financial markets are not likely to disappear anytime soon,” the institute notes.
“Most importantly, the United States appears well positioned to remain at the forefront of high-tech innovation and absorption based on its access to venture capital and other types of financing, its entrepreneurial culture, and other strengths that support investment.” that increases productivity and economic growth. potential,” he added.
In terms of investment implications, the prospects for enduring US exceptionalism and a strong technology sector support a continued preference for the US market.
Wells Fargo believes that American technology will continue to outperform tactically in the near term and strategically in the long term, driven by ongoing digitalization and innovative technologies.
As a result, the institute recommends a long-term overweight position in information technology, communication services and other technology-exposed sectors.
He also advises increasing international exposure through American multinationals in energy, materials and industry, aligning with his vision of sustained American exceptionalism.
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