Are we seeing the end of US exceptionalism?
Over recent months, President Trump’s policy decisions, market turmoil and uncertainty about the US and global economy have raised questions about the future of the US’s influence on the world stage.
Steen Jakobsen, an investor and former chief economist and chief investment officer at Saxo Bank, known for his popular ‘Outrageous Predictions’, discussed the topic in the keynote address of Spear’s 500 Live, the premier live event for private client professionals, held on 7 May at The Savoy.
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‘Once in a generation, we do see that things change dramatically,’ Jakobsen said, and the future of the US’s position on the world stage will be ‘the most important question in our lifetime’.
Trump’s tariffs and a coming trade war
The US maintaining its ‘soft power’ is ‘all well and good’, Jakobsen added, but it’s the hard facts that explain the loss of confidence and increase in negative sentiment. To put it simply, the US is living beyond its means, putting a huge amount of debt on the public balance sheet without the ability to refinance itself. ‘The stupidity of politicians turns things around in terms of how we perceive things.’
‘American exceptionalism is nothing but not having savings,’ Jakobsen added.
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This, combined with the introduction of tariffs (‘If there’s one thing Trump believes in, wrongly, it is that tariffs work’) and a simmering trade war with China (‘China has zero appetite to engage with the US’) is undermining trust in the US dollar and US Treasuries.
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‘Going forward, what is important to understand is that the unintended consequences of these policy measures are vast, and they are very, very significant,’ Jakobsen explained.
‘The US today will not be able to finance itself over the long term unless they step back. But we also have to remember that this is all self-inflicted … These are policy measures, policy mistakes dictated because of wanting to do the right thing. But as is often the case with politicians, they have good intentions but very little IQ, and very little ability to actually execute.
‘So we end up in a situation where the ability for capital to sustain what is going on is going to be very, very difficult. It also has created a huge momentum surge in the rest of the world, in particular in Europe.’
What action investors can take
What does it mean for investors, whose portfolios are often weighted towards the US?
For Jakobsen, an adjustment in asset allocation is not enough: ‘You’re saying maybe we should reduce our exposure to the US by 1 per cent to 2 per cent instead of really grasping and dealing with the fact that, going forward, the US as a reservoir of capital will be smaller. Not because the US wants it to, but because the rest of the world doesn’t want to finance it anymore.
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‘The next 10 years is going to be [a question of], “How do you retain and keep your purchasing power in a world where you have a constantly devaluing US dollar?”. You may not see a total collapse of the US market, and certainly you’re not going to see US exceptionalism totally disappear. But underneath, at the micro level, a huge amount of capital is going to flow into Europe, into Asia, into the Middle East.’
Gold and productivity are key
Gold, Jakobsen argues, is the ultimate measure of purchasing power, and he advises investors to do their annual reports in their own currency as well as in gold. Finding pockets of productivity – Jakobsen highlighted that military spending, logistics and manufacturing – would also be crucial.
And while there are unique opportunities on offer, ‘If you live over the next many years with the concept, “I have time to wait,” I think you’re going to lose out.
‘It may not sound like it,’ Jakobsen concluded, ‘but I am the most optimistic I’ve been in my whole career as a trader and as an economist.
‘For one reason only: It can’t get any worse.’
Spear’s 500 Live is the premier live event for private client professionals and leading figures from the private wealth and family office ecosystem. The 2025 edition took place at the Savoy in London and was attended by more than 500 high-calibre delegates.
Spear’s 500 Live was presented in association with our partners, Blacklane, the Charities Aid Foundation, CMB Monaco, HCA Healthcare UK, Henley & Partners, Interpolitan, Invest Barbados, Maddox, Mast Capital, Sentinel Resource Group and Stewardship.
For commercial enquiries concerning Spear’s events, contact shady.elkholy@spearswms.com.
