Investor sentiment dramatically changed after Treasury Secretary Scott Bessent and other members of the Trump administration announced a temporary pause on tariffs with China. Was that sentiment shift warranted and did anything materially change? Estimates of the effective tariff rate continue to vary and have wide confidence intervals. Volatility will likely remain as the Trump administration is interested in managing perceptions with both midterms and markets in mind. This might explain the high degree of strategic variations in trade policy. Amid the variance, what hasn’t changed is the exceptional structure of the U.S. The two main reasons we believe U.S. exceptionalism will remain — probably for a very long time — are the depth and breadth of U.S. capital markets, and the reserve currency status of the U.S. dollar (USD).
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