The S&P500 is still underwater YTD, adjusted for currency depreciation I am not trying to make any

[human1234]

The S&P500 is still underwater YTD, adjusted for currency depreciation

I am not trying to make any predictions here, but after the "great crash" of 2025 a few months ago, many people jumped the gun in saying: "you see? it's all panic, stocks only go up". I am heavily invested in Europe since last year and I have been warning that Trump would not be good for the US stock market. People did not believe me back then and do not believe me now. YTD, the S&P500 is up 9.7%. At the same time, the USD vs EUR is down -11%. If we add in inflation, it's even worse.

Right now, this bull market is sustained only by AI hype and not much else, with the mega caps outperforming the rest of the index, while recent job reports now suggest that the economy is going worse, hitting highest youth unemployment since May 2021. Perhaps the stock market will continue to go up, because higher unemployment means lower rates, but it also means inflation will probably be higher. If Trump gets want he wants with rates, turkey-style hyperinflation is not impossible. Given that the US government debt relative to GDP continues to compound, either the dollar goes down in value, or taxes need to go up, at some point. 

Damaging diplomatic relationships and putting in question the independence of the FED and meddling with the private sector (I am pointing at Trump saying that Intel's CEO should be fired, his decision to stop near-completed wind turbine projects being built in the US by Danish companies, his relationship with musk, saying he wants to lower the value of the dollar to make exports competitive....) is the worst thing he can do, since US bonds and stocks is one of the biggest exports that the US has. This is justified by the "US exceptionalism". But if this exceptionalism is put into question, that will have huge consequences. 

Regardless, what the FED does or does not do should not influence us as value investors, but my point remains: US exceptionalism is more than priced in already, and at current multiples, it is justified by AI, recency bias, and a tendency of investors to chase returns. 

 

https://www.reddit.com/r/ValueInvesting/s/ovc10LUPZB