The U.S has traditionally been a safe haven for investing, but that hasn’t been the case in 2025. We explore three economic and narrative regimes and consider why we may be witnessing a shift after 12 years of U.S. outperformance.
Topics covered include:
- What was the narrative and economic and financial performance from 1995–2001, 2002–2012, and 2012–2024.
- How the performance of the U.S. dollar impacted returns
- Why did economic forecasters predict the U.S. national debt would be paid off in 2011, and why were they wrong?
- Signs that the current economic and financial narrative is shifting.
Show Notes
Federal Surplus or Deficit [-] as Percent of Gross Domestic Product—FRED Economic Data
Nonfarm Business Sector: Labor Productivity (Output per Hour) for All Workers—FRED Economic Data
Donald Trump vs Mr Market by Tim Harford—The Financial Times
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Transcript
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is episode 521. It’s titled, “Is the Rest of the World Selling America?”
Investment Narratives
For decades, the U.S. has been a favored investment destination, drawing capital from every corner of the globe. But today, the narrative appears to be shifting. Robert Shiller, in his 2019 book, Narrative Economics, wrote, “A key proposition of this book is that economic fluctuations are substantially driven by contagion of oversimplified and easily transmittable variants of economic narratives.” In other words, economies and financial markets are driven by stories.
David Tuckett, who’s trained in economics, medical sociology, and psychoanalysis, wrote “When investors buy, sell or hold all classes of financial assets, what they’re doing is constructing narratives about their future relationships with an imagined idea, what they think will happen.” We all do this. We do it subconsciously. And stories can change.
What I want to do now is go through three economic regimes over the past 30 years. This timespan covers my investment career. And we’ll look at the stories that drove what was going on, and how that was reflected in financial outcomes.
First Economic Regime
The first period is July 1995 to July 2001, a six-year period. I began my investment career in July 1995. I joined FEG Advisors as an analyst/consultant, and I remember that the U.S. stock market rose 37% in 1995. And over that six-year period—this was during the dotcom bubble, where there was internet mania. Stock markets were soaring in the U.S. The U.S. was attracting gobs of foreign capital to invest in many of these startups, and in the U.S. market overall.
Growth stock investing trounced value investing. And that capital flowing into the U.S. led to the appreciation of the U.S. dollar. It appreciated about 6% per year over that six-year period. It was great fiscally for the U.S. The U.S. ran budget surpluses from 1998 to 2001. It was bringing in more tax revenue than it was spending, because there was a great deal of tax revenue coming from capital gains, as companies were being bought, investors were realizing capital gains. It was an amazing time. It was a great time to start as an investment advisor, because there was this huge tailwind.
Over that period, interest rates were generally in that 5% to 6% range. And if we look at the returns, the U.S. stock market significantly outperformed the rest of the world. It returned over 14% annualized over that six-year period. The world Ex-U.S. in U.S. dollars, barely returned 4% annualized. Now, in local currency, it returned over 9% annualized, but again, the U.S. dollar was strengthening, so if you were a U.S. investor investing overseas, that strengthening dollar meant your U.S. dollar-based non-U.S. returns were lower. And that was the regime.
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