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Is the United States an Emerging Market?

Ian Bremmer, a political analyst and thought leader as well as the founder of Eurasia Group, defined emerging markets as “countries where politics matter at least as much as economics to markets.” Using that definition, while the United States remains the global hegemon and dominant economy, you could also argue that America qualifies as an emerging market.

Think about it. What are the odds that the 2024 presidential election features two well-rounded and non-controversial candidates?

What are the odds that the losing side accepts the results without protest?

What are the odds that any president in the foreseeable future serves out their term without the distraction of impeachment hearings, or at the very least the threat thereof?

 Think about that last one for a moment. What had previously only happened once per century (Andrew Johnson in 1868 and Richard Nixon in 1974) has become a regular part of the American political process. Bill Clinton was impeached in 1998. There was talk of impeaching both George W. Bush and Barack Obama. And Donald Trump was actually impeached, not once, but twice (2019 and 2021.)

While impeachment talk creates a lot of noise in Washington and produces fodder for Fox News and MSNBC, you could argue that for the most part markets manage to drown out that noise. But what about the now recurring conversation about defaulting on the national debt? As a reminder, it’s that same debt, in the form of Treasury Bills, that constitutes the “risk-free rate” in financial markets. For those that aren’t familiar, the risk-free rate in turn is used as a reference point in pricing most other financial assets.

Political turmoil certainly isn’t unique to the United States. England has Brexit. Europe has continued deliberations about its Union, as well as Russia’s invasion of Ukraine and the expansion of NATO. Japan is in a neighborhood with a rising global power (China) who just happens to be a long-term rival, as well as a dictatorship with nuclear weapons (North Korea.) Taiwan may or may not even be a country, depending on who you question on the subject. I could go on, but you get the point.

So, maybe asking if the United States is an emerging market isn’t even the right question. Maybe the real question is: At this point, what country isn’t?

And if we’re facing a future where politics matters at least as much as economics, maybe it’s time to take a fresh look at whether we’re placing enough emphasis on political risk analysis as it pertains to investing.