Investing.com -- US stocks have been shunned by investors looking to flee from tariff-related turmoil that has cast a dark cloud over the country’s international reputation, but Jefferies believes American exceptionalism is not dead and the US is still investable as the driving force behind the economy remain intact.
"American exceptionalism is not dead and the US is still ‘investable’ despite obvious and tangible hits to the country’s international reputation and perceived trustworthiness," analysts from Jefferies said in a note.
While the tariff shock has rattled sentiment and led to a “ham-fisted approach to trade policy,” the analysts believe that the underpinnings of US growth remain intact.
Even as economic growth slows below potential for an extended period, the U.S. is likely to avoid recession, they added, expecting the second-quarter growth to likely show a perverse improvement in growth as consumers pulled forward demand ahead of tariffs.
This pull forward in demand is significant because consumers are opting to spend rather than save.
"It is significant that the reaction to the tariff expectations in March was ’I should buy more stuff before it gets expensive’ rather than ’I need to save more money because I’m losing my job/my stock portfolio cratered’," Jefferies said.
“It’s pretty difficult to model out a negative GDP print for the US economy. More than two-thirds of the nearly $30 trillion economy is rooted in consumer spending,” it added.
The economy is also likely to receive a helping hand from the Fed, Jefferies says, expecting three rate cuts this year, albeit later in the year than previously expected.
"We continue to expect 3 rate cuts from the Fed this year, but we are pushing out the timing to September from June," Jefferies said.