The U.S. Is Still the World’s Greatest Economic Dynasty

The U.S. equities’ market cap is roughly $63 trillion—more than double that of China and the European Union’s equity markets combined. (ANGELA WEISS / AFP / Getty Images)

About the author: Joseph Quinlan is head of market strategy at Merrill and the Private Bank, Bank of America.

The decline of American exceptionalism has been a major theme of the markets this year. U.S. policy uncertainty and intractable budget deficits have driven a consensus that there is nothing exceptional or superior about the U.S. All the action—and the returns are overseas.

The rest of the world just might outperform U.S. indexes this year—but that doesn’t mean investors should write off the American economy for good. It is one of the world’s most dominant and durable economic systems ever created. It is a dynasty, in other words.

Dynasties rely on their endurance, the sustainable capacity to lead over extended periods. A dynasty may not win each year, but it will always remain competitive—always near the top of the leader board, setting the tone, and raising the bar for others. Think of the Boston Celtics, who won 11 titles between 1957 and 1969. Or the New England Patriots, the winner of six Super Bowl titles in nine appearances this century. Or the Montreal Canadians winning five consecutive Stanley Cups between 1956-1960, a record still unmatched.

These dynasties all have consistent, high-end performance, an ability to attract and leverage superior talent, strong fundamentals, and an innate ability to reinvent themselves and adapt to changing circumstances. These are traits of sports dynasties, and they also define the U.S. economy.

In terms of sustained performance, the U.S. economy has grown 87% of the time since 1945. Any sports team would die for that kind of streak.

This superior performance helped boost U.S. nominal gross domestic product from roughly $300 billion in 1950 to more than $30 trillion today. With just 4.2% of the world population, the U.S. accounts for 27% of world output. It has sustained that level for nearly a half century. Talk about enduring excellence.

The U.S. economy is hydra-headed superpower, with particular strengths in aerospace, agriculture, finance, energy, technology, healthcare, education, entertainment and numerous other activities in both manufacturing and services.

The backstop to this performance has been America’s ability to attract and develop talent. Even with the current immigration policies, the U.S. remains a magnet for top international talent. The Institute of International Education still predicts the number of international students—which hit a record-high 1.1 million the the 2023-24 academic year—will keep growing over the midterm.

Dynasties are only as strong as their foundations, and our universities are just part of this structure. Other foundational supports include the largest, deepest and most sophisticated capital markets in the world, the world’s reserve currency, leadership in global brands, a bounty of natural resources, food and energy independence, and unparalleled spending on military and technology.

With the exception of Israel and South Korea, the U.S. invests more into research and development than any other country, at roughly 3.5% of GDP. The market cap of some of its leading tech firms— Nvidia ($4.2 trillion), Microsoft ($3.9 trillion), and Apple ($3.1 trillion)—is larger than the gross output of most nations. They account for more than half of global private-sector investment in artificial intelligence.

But dynasties must embrace change and turnover—or they die. America’s unique entrepreneurial ecosystem and economic metabolism encourages and enables an incessant churn of creative destruction: Since 2000, 52% of the companies on the Fortune 500 list have gone bankrupt, been acquired, or ceased to exist. But some 5.2 million new businesses were started in the U.S. in 2024—a near-record high and a figure well above the average of the prior decade. Many of these firms will fail over time. But the survivors will provide fresh competitive blood that helps sustain America’s economic dynasty.

And yet, competition never rests. China is rising, with Beijing’s state-directed and controlled economy keenly focused on unseating the U.S. at the top of the global economic hierarchy. The European Union has economic heft, but lacks the political cohesion and leadership to make a run for the brass ring. Japan never recovered from its asset price collapse in the early 1990s due to its inability to pivot, change, and reinvent itself.

The bottom line is that the bubble in American exceptionalism is losing steam—but don’t write it off just yet. Great teams don’t win every year. For investors, some of the best market returns are generated by consistent, high-performing, talent-laden, cutting-edge, adaptable teams.

Ergo: buy and hold the American economic dynasty.

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