Semiquincententacles: The US grip on markets on the 250th anniversary of the Declaration of Independence<br><br>Behold the Aquilaceph, half-bald eagle and half-octopus. On the semiquincentennial 250th anniversary of the US Declaration of Independence, this imaginary beast is a metaphor for the continued US grip on financial markets. In this special issue we look at the details: US reserve currency status, capital flows, the much anticipated but still unprofitable “Sell America” trade, US corporate profitability and productivity in the age of AI, investing in Security &amp; Resilience, equity market concentration, energy independence and the revival of the US IPO market. The biggest medium-term concerns for investors in US assets, other than the sustainability of the US Federal debt and cyclical inflationary pressures: the increased unpredictability in the rule of law, and government defunding of science and sidelining of scientific expertise.<br><br>Watch the video

Semiquincententacles

Eye On The Market

# Full Transcript

**Podcast:** Eye On The Market

## Participants

- **Michael Cembalest** (JPMorgan Asset Management)

## Transcript

This podcast has been prepared exclusively for institutional, wholesale, professional clients, and qualified investors only, as defined by local laws and regulations. Please read other important information, which can be found on the link at the end of the podcast episode. Good afternoon, everybody. This is Michael Cembalest with the June Eye On The Market podcast.

I wanted to do something special this time in commemoration of the 250th anniversary of the Declaration of Independence. So I put together a long-form piece called Semiquincententacles. Let me get this right. Semiquincententacles. The semi-quincentennial is the 250th anniversary of the United States.

And the image that we created for this Eye On The Market is an Aquilicef, which is a name I made up, but it refers to this beast that you can see here that is a combination of a bald eagle and an octopus. And it's a metaphor for the tight grip that the U.S. on its 250th anniversary still has on global markets. And so in this issue and in this podcast, we look at the details. I'm doing a webcast that will go through more details.

This is going to be a more abbreviated version in this podcast of the materials. And, of course, to get the whole shebang, you've got to look at the actual PDF itself. And I'm going to cover issues like the U.S. reserve currency status, capital flows, this much anticipated but so far unprofitable sell America trade, corporate profitability and productivity at a time of AI, investing in security and resilience,

equity market concentration issues, energy independence, and then the revival of the IPO market. And we also take a look at some of the medium-term risks that I'm concerned about for investors, which is the increased unpredictability in the rule of law and government defunding and sidelining of scientific expertise. So, again, this is an abbreviated version. Let's get into it. Let's start with the reserve currency status.

The usual suspects on this are the U.S. has a large budget deficit. That's true, although note that China's, at least the way the IMF computes it, is even worse. Rising government debt. The U.S. has a debt ratio that's basically doubled from 60% to 120% of GDP over the last 20 years. Again, not that different from China.

And then overall, total economy-wide debt, which is usually looked at as household, non-financial, corporate, and government debt together. Here, the U.S. has been kind of flat because what was happening was that for a while, the government debt was offsetting declines in household and corporate debt. And here, China's much worse.

And then the other thing that dollar doomsayers typically point to is the increase in U.S. sanctions applied to different entities and individuals, the idea being more and more sanctions would make people less interested in holding dollar-denominated assets ...

Semiquincententacles

Transcript

Built for investment professionals

Every day you wait, your competitors are finding
edge in conversations you're not hearing.

Semiquincententacles

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.