Key takeaways
- The U.S. is the only country that has returned to its pre-pandemic potential growth path.
- Tariffs are expected to create wider performance gaps in global growth, reinforcing U.S. exceptionalism.
- While DeepSeek’s new AI model is challenging the valuation premium of American tech companies, the outlook for U.S. equities remains positive.
- Overall, while U.S. exceptionalism appears to be the consensus view in 2025, it could play out in several different ways, depending on U.S. policy and new developments in the AI space.
2024 marked another year of U.S. exceptionalism — defined as the idea that the U.S. is distinctive or exemplary compared with other nations — with clear outperformance by the American economy and financial markets.
Looking ahead, U.S. dominance looks set to continue under President Trump’s second term, especially as tariffs are expected to create wider performance gaps in global growth. However, will the rise of DeepSeek challenge U.S. exceptionalism in equity markets? What else can we expect to see in 2025 and beyond?
The global outlook for 2025
On the whole, policies under the Trump administration are expected to benefit the U.S., while having uneven impacts across other regions.
What are the factors contributing to US exceptionalism?
American outperformance has largely been fueled by robust consumer spending and a resilient labor market. Fiscal policy has also been a key factor, with legislation such as the Infrastructure Investment and Jobs Act and the CHIPS and Science Act boosting the U.S. economy.
President Trump’s “America First” stance could further reinforce U.S. exceptionalism in the coming months. On one hand, the new administration’s willingness to cut taxes and reduce regulation should boost domestic growth via the sentiment channel. Conversely, restricting immigration and raising tariffs should work as a negative supply shock, weighing on ex-U.S. equities.
“Macro data and early reading of policies from the new administration reinforce the broad positive view on risk assets, favoring the U.S.,” said Fabio Bassi, head of Cross-Asset Strategy at J.P. Morgan.
What’s the US growth outlook?
“In a clear display of U.S. exceptionalism, the U.S. is the only country that has returned to its pre-pandemic potential growth path, and the gap between U.S. growth and the rest of the world (RoW) continued to widen in 2024,” said Joyce Chang, chair of Global Research at J.P. Morgan.
U.S. real GDP currently stands nearly four percentage points above its pre-pandemic potential path, while the RoW maintains a negative gap greater than one percentage point. According to J.P. Morgan Research, however, U.S. GDP growth is set to slow slightly this year to 2.4% in 2025, down from 2.8% in 2024 (on a full-year basis), while the unemployment rate is forecast to gradually increase to a peak of 4.2% around the middle of the year, up from January’s reading of 4.0%.
Other signs point to an economy that’s in good shape. For instance, U.S. business and residential investment are both projected to increase around 3% despite elevated long-term interest rates. Since July 2024, HP business applications — those with a higher propensity to turn into businesses with payrolls — have increased by 21,000, with 85% of this growth coming from new applications identified as retail trade.
In addition, the U.S. remains a global demand engine, with higher consumer spending compared with the RoW. U.S. domestic demand has increased by a robust 3.2% over the past four quarters — a faster pace than in the previous four quarters. Moreover, U.S. real spending has increased by 14% since the fourth quarter of 2019, while gains in Western Europe and Japan have been less than 2%, further underscoring U.S. outperformance.
Real GDP relative to pre-pandemic potential path
In terms of real GDP, the U.S. is the only country that has returned to or exceeded its pre-pandemic potential growth path.
“While U.S. exceptionalism has been a dominant theme for a while, it has, in our mind, more than one manifestation. We view the uncertainty around the sequencing and details of U.S. policies, as well as the evolution of the AI complex, as critical factors.”
Fabio Bassi
Head of Cross-Asset Strategy, J.P. Morgan
How might US exceptionalism play out across markets?
U.S. exceptionalism could be supportive of U.S. equities in 2025. “In 2024, U.S. exceptionalism resulted in the notable outperformance of U.S. equity markets, with the Nasdaq and S&P 500 outperforming global equities — a theme we expect will persist this year,” Bassi said.
However, U.S. exceptionalism in the tech space is being called into question due to the recent success of DeepSeek. The Chinese company’s new AI model — which was made at a fraction of the cost of rival products — is challenging the valuation premium of U.S. tech companies, which have long dominated the industry and are a major driver of the stock market.
Despite these developments, the outlook for U.S. equities remains positive. “We believe the DeepSeek headlines do not alter the U.S. exceptionalism narrative. Instead, we see this broadening the AI theme,” Bassi observed. “Increased competition with lower barriers to entry should enhance the investment opportunity, with the U.S. still holding a first-mover advantage. Thus, we see this development as an accelerator to U.S. exceptionalism.”
Elsewhere, a resilient macro outlook, solid balance sheets and receding recession fears have contributed to the strong performance of credit as an asset class, with the U.S. outperforming the EU in the high-yield space and delivering similar returns in the high-grade space. And in FX, President Trump’s tariff policy is expected to bolster the USD, with higher import duties driving up the dollar’s value.
Overall, U.S. exceptionalism appears to be the consensus view in 2025, underpinned by strong fundamental factors including tech innovation and the broadening AI cycle. That said, it could unfold in different ways:
The different shades of US exceptionalism
| Scenario 1 | Scenario 2 | Scenario 3 |
| U.S. displays outperformance against a broadly positive global growth backdrop. | U.S. growth is more pronounced at the expense of the RoW. | Extreme Trump policies undermine confidence and sentiment, derailing both U.S. and global growth. |
| Trump policies prove moderate on the supply side. | Fear of a tariff-induced trade war drives a broad risk-off sentiment in equities and credit. | Deteriorating macroeconomic and employment conditions should prompt the Fed to cut rates. |
| There is strong performance in risk assets, moderate USD bullishness and a data-driven outlook for rates. | USD strengthens due to tariffs and diverging monetary policy between the Fed and the RoW. |
Source: J.P. Morgan Cross-Asset Strategy
“While U.S. exceptionalism has been a dominant theme for a while, it has, in our mind, more than one manifestation,” Bassi noted. “We view the uncertainty around the sequencing and details of U.S. policies, as well as the evolution of the AI complex, as critical factors that will continue to influence market dynamics as the year unfolds.”
Related insights
-
13:29 - Markets
Trading insights: Can US exceptionalism keep its shine?
February 14, 2025
-
Global Research
Market outlook 2025: Navigating cross-currents
December 17, 2024
How are markets expected to play out in 2025 against a backdrop of policy uncertainty, geopolitical risks and heightened macroeconomic volatility? Explore the outlook for equities, commodities, currencies, emerging markets and more.
-
Global Research
De-dollarization: Is the US dollar losing its dominance?
October 08, 2024
Top dollar no more? Learn more about the factors threatening the dominance of the world’s reserve currency.
This material (Material) is provided for your information only and does not constitute: (i) an offer to sell, a solicitation of an offer to buy, or a recommendation for any investment product or strategy, or (ii) any investment, legal or tax advice. The information contained herein is as of the date and time referenced in the Material and J.P. Morgan does not undertake any obligation to update such information. J.P. Morgan disclaims any responsibility or liability, whether in contract, tort (including, without limitation, negligence), equity or otherwise, for the quality, accuracy or completeness of the information contained in this Material, and for any reliance on, or uses to which, this Material, is put, and you are solely responsible for any use to which you put such information. Without limiting any of the foregoing, to the fullest extent permitted by applicable law, in no event shall J.P. Morgan have any liability for any special, punitive, indirect, or consequential damages (including lost profits or lost opportunity), in connection with the information contained in this Material, even if notified of the possibility of such damages. Any comments or statements made herein do not necessarily reflect those of J.P. Morgan, its subsidiaries or its affiliates.
All materials and information shared with you are, unless otherwise indicated to you, proprietary and confidential to J.P. Morgan. You are hereby notified that any disclosure, dissemination, copying, distribution, or use of the information provided to you, in whole or in part, other than as expressly permitted by J.P. Morgan, is STRICTLY PROHIBITED. You are permitted to disclose the materials and information to your officers and employees on a need to know basis. Should you have any questions regarding this, please contact your usual J.P. Morgan contact. For further information please visit:https://www.jpmorgan.com/pages/disclosures/materialdisclaimer.
© 2025 JPMorgan Chase & Co. All rights reserved. J.P. Morgan is a marketing name for businesses of JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide. JPMorgan Chase Bank N.A. (member of FDIC), J.P. Morgan Securities LLC (member of FINRA, NYSE and SIPC), J.P. Morgan Securities plc (member of the London Stock Exchange and authorized by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority and the PRA) and J.P. Morgan SE (authorised by the BaFin and regulated by the BaFin, the German Central Bank and the European Central Bank) are principal subsidiaries of JPMorgan Chase & Co. For legal entity and regulatory disclosures, visit: www.jpmorgan.com/disclosures. For additional regulatory disclosures, please consult: www.jpmorgan.com/disclosures.