'Don't discount the ability of US companies to manage through whatever's in front of them,' says head of Americas portfolio management at Franklin Templeton Investment Solutions
For years, the US stood out as a reliable engine of earnings growth, driving superior equity market performance. But with President Donald Trump’s trade policies introducing fresh layers of uncertainty across sectors, a growing number of investors are beginning to question whether those advantages can hold.
But as Michael Greenberg describes, the current state of US exceptionalism has lost some of its shine but still holding firm.
“I’d say it’s probably bruised but maybe not broken,” said Greenberg, head of Americas portfolio management at Franklin Templeton Investment Solutions, highlighting that in the years leading up to today’s more uncertain environment, the US earned its reputation through a series of standout metrics, notably around stronger economic growth, better stock market returns, and a disproportionate number of huge growth companies compared to the rest of the world.
Consequently, he believes the market rewarded this outperformance.
“Its weight in indices like the MSCI World Index peaked at something like 67 per cent which is amazing, given when you look at it from a nominal growth perspective. The US is only around 26 per cent of global nominal GDP. That’s not to say it's not deserved,” he added, highlighting how US companies have consistently delivered high returns on equity.
However, Greenberg underscored that the sheen of exceptionalism is facing pressure from two directions: softening fundamentals in the US and improving conditions elsewhere. Even traditionally safe US assets like government bonds aren’t immune from scrutiny. While investors still trust the “full faith and credit” backing Treasuries, Greenberg warns of concerns about yield movements and price impact. This uncertainty, particularly around tariffs and tax policy, is beginning to influence investor behavior.
“We do see investors reducing exposures, maybe to diversify rather than to abandon,” he noted Despite this pullback, however, Greenberg maintains that the US remains attractive.
“It’s the biggest consumer market in the world, there’s a lot of innovation that happens,” he added. “Don’t underestimate the ability of corporate America to manage through stuff.”
At the same time, he sees a changing landscape in Europe. With key reforms gaining momentum, including fiscal loosening in Germany and potential deregulation, investors are increasingly drawn to opportunities outside the US. He noted this marks “a pretty monumental shift which makes that part of the market a little bit more attractive.”
So, what does US exceptionalism mean now and why does it matter? For Greenberg, the concept was never about economic superiority.
“As investors, we don’t necessarily invest directly in economies, we obviously invest in stock markets,” he said, emphasizing that what matters most is the performance of companies. Consequently, US firms have arguably consistently delivered on revenue, profitability, and growth.
He believes several structural advantages have contributed to this success as he pointed to a combination of “relatively low and stable interest rates,” a “healthy consumer,” and “relatively less regulation” compared to other regions. These factors, paired with a strong entrepreneurial culture, have created fertile ground for innovation, as Greenberg referenced the startup spirit that has propelled many US companies from obscurity to billion-dollar valuations.
He believes this environment has ultimately made the US an especially attractive destination for capital.
Greenberg contrasts this with Europe, which he describes as burdened by structural and regulatory fragmentation where “there’s maybe a little bit of a buffer between those countries that make it a little bit more difficult to do business,” he said. Even Canada, faces interprovincial barriers that complicate commerce. Whereas the US benefits from federal cohesion.
“There are obviously differences between the states, but there’s a strong federal umbrella that brings the whole US together,” he said, adding that unity, along with consistent innovation and investor-friendly conditions, helped fuel strong stock and currency performance, hallmarks of what many viewed as US exceptionalism.
As for asset performance, he’s quick to highlight the massive run-up in US equities which have jumped from around 50 per cent to 67 per cent of the global index.
“Managers like us that have held a little more US have benefited from that,” he acknowledged.
Yet, he does pose the consideration that it might not a bad time to look at other markets that haven’t performed as well, that might have some interesting growth prospects.
He draws attention to fixed income and currency markets as an example, noting that the US dollar, while still dominant, isn’t immune, pointing to rising credibility of the euro and moderate interest in other currencies like the Canadian or Australian dollar.
He also acknowledged the growing role of alternatives, though cautiously. While cryptocurrencies, gold, and precious metals have seen some interest, Greenberg doesn't see them as serious replacements for the dollar.
As for US Treasuries, he argues they’re “the most large and liquid safe haven asset in the world,” but also recognizes growing pressure from more valuation-conscious investors.
“The price sensitive investors, investors like ourselves, might be saying, ‘Hey, you know what? It's probably not a bad time to diversify and maybe add a little bit more European government bond exposure, maybe more Canadian government bond exposure,” he noted.
Still, he points out that these long-term shifts could be derailed by short-term market moves. If the US were to experience a sharp recession, Greenberg emphasized the Federal Reserve would likely cut rates more aggressively, leading to a rally in both the dollar and Treasuries.
Greenberg doesn’t buy into narratives that US exceptionalism is completely over, as he asserted that some of these trends can take quite a long time to change. Ultimately, he believes the US still holds unmatched advantages, particularly in consumer behaviour and technological innovation.
“Don’t discount the ability of US companies to manage through whatever’s in front of them,” he said. “A growth slowdown is still expected and it’s not necessarily a disastrous environment. It’s not only good for the US, but probably for the global economy. The US is a big driver of the global economy. If the US was to enter a recession, it'd be tough for other countries, like Canada to avoid one. It’s important to see where they go."
