一个时代的终结

of non-US analysts at the end of thisreport.*Jefferies Hong Kong Limited22 May 2025The end of an eraLondonExhibit1: MSCI AC World ex-USA IndexSource: Bloombergfinally happened.Exhibit2: MSCI USA as % of MSCI AC World IndexSource: FactSet, MSCI13018023028033038020072008404448525660646820002001(%) 2009201020112002200320042005 20122013201420152016201720182019202020212022MSCI AC World ex-USA Index2006200720082009201020112012201320142015201620172018201920202021MSCI USA as % of MSCI AC World 2The above does not mean that the American stock market has to collapse. The point is that a share of 67% ishuge,given America accountsfor only26.4%of the world economyin terms of nominal GDP in US dollar termsandonly14.9% on a PPP basis,even allowing for the global franchises ofUSBig Tech. But it does suggestThere are several reasons to bet on a weaker dollar. One not unimportant oneis that Donald Trump himselfwants a weaker dollar. Another is that the highly personalized nature of Trump’s style of governing, with theresulting unpredictability reflected in the twist and turns on tariffs in recent weeks, should create a naturaldiscount. There was a good article on this phenomenon in theWashington Postrecently (seeWashington Postarticle: “’I own the store’: Trump seeks a direct role in the economy”by Naftali Bendavid, 18 May 2025).Thearticle noted, among other things,that“few Republicans have challenged Trump on his highly personal style,despite its clear departure from traditionalfree-market economics. Nor have they taken issue with theStill,by far the most important reason toassumea long-term weakening of theUSdollar is that America’sextreme fiscal deterioration post-Covid,courtesy of Fed largesse,means that the most likely end gameremains a growing resort to financial repression resulting in some form of yield curve control and evenpossibly exchange controls. Such a trend would clearly be US dollar–bearish, most particularly yield curvecontrol. Meanwhile, the most likely currency bloc to enjoy long-term appreciation against the US dollar remainsAsian currencies in what amounts to a reversal of the dynamic triggered by the Asian Crisis nearly 30 yearsago, as previously discussed here(seeGREED & fear-Asian currencies and Hong Kong asset prices, 8 May2025). This is not only because the Trump administration is targeting mercantilism, where Taiwan is by farthe supreme practitioner. It isalsobecause Asia, as a region, has the savings.Gross national savings inemerging Asia, which includes China but excludes Taiwan and Korea among others,were39% of GDP in 2024,compared with 20.1% in G7countriesand 17.3% in America, according to the IMF(see Exhibit 3).Note: Emerging Asia excludes Hong Kong, Korea, Singapore and Taiwan.Source: IMF-World Economic Outlook DatabaseAs for the story of the week, namely Moody’s sovereign downgrade, it has not been a big deal in terms ofmoving markets, asthe rating agency’s downgradehas only arrived where S&P and Fitch already were.ThusMoody’s downgradedUS sovereigncreditratinglast Friday by one notchfrom Aaa to Aa1.S&P and Fitchalready lowered their credit ratings for US debt inAugust2011 andAugust2023,respectively,from AAA to2018202020222024 22May2025Please see important disclosure information at the end of this report.that the US dollar has entered a long-term downtrend,which isalsothe base case here.overlaps between his personal interests and the nation’s”.Exhibit3: Gross national savings as % of GDPAA+.Still,the downgrade will mark a chapter in the history books.10152025303540455055198019821984(%) 1994199619982000200220042006Emerging AsiaG7 198619881990199220082010201220142016ChinaUSA 3Meanwhile, there was a poor 20-year Treasury bond auction on Wednesday,which caused a further backup inthe 10-year and 30-year bond yields in the context of growing concerns about the fiscal consequences of theTrump administration’s renewed focus onpushingthrough tax cuts.The 10-year and the 30-year Treasurybond yields have risen from 4.45% and 4.90%,respectively,on Monday to 4.61% and 5.12%, the highest levelMovingto Europe,the latest evidence that the Trump agenda has woken upthe old continentis the Germancommitment to increase its defence spending to 5% of GDP.German Defense Minister Boris Pistoriussignaled Tuesday that Berlin could gradually move toward spending 5% of GDPon defense, up from thecurrent budget of around 2% of GDP.Speaking ahead of the EU Foreign Affairs Council for Defence,hesaidthatthe plan is to increasethe defence budget by 0.2%of GDPperyearover the next5-7 years.Thiscameafterforeign minister Johann Wadephulsaid lastThursdaythat Germany would supportTrump’s push forOn this point,bankand defence stocks should form a core part of any European equity portfolio. On the banks,GREED & fearwas interested to see that bank loan growth in Greecewasrunning atan impressive10.6%YoYin Marchwhile credit growth hasturned up in Spainata positive1.8% YoY in March, up from a 3.2% YoYdecline in November 2023 (se