Global Stocks Are Crushing Wall Street And Trump's Tariffs In 2025

Global equities are significantly outperforming U.S. stocks in 2025, with the iShares MSCI All Country World Index Ex U.S. ETF (ACWX) up 20.5% year-to-date, nearly 10 percentage points ahead of the S&P 500. This marks the strongest outperformance since 2009, reversing a 15-year trend of "U.S. exceptionalism." Key drivers include new international trade agreements, a 10% year-to-date depreciation of the U.S. dollar, and looser monetary policies from global central banks, signaling a potential shift in market leadership.

Analysis

A significant rotation from U.S. to international equities is underway in 2025, marking a potential end to the 15-year trend of 'U.S. exceptionalism'. The iShares MSCI All Country World Index Ex U.S. ETF (ACWX) has returned 20.5% year-to-date, outperforming the SPDR S&P 500 ETF (SPY) by nearly 10 percentage points—the widest performance gap since 2009. This historic reversal is propelled by three primary factors: divergent monetary policy, a weakening U.S. dollar, and resolved trade tensions. While the Federal Reserve has maintained its policy stance, global central banks like the ECB and BOJ have initiated rate cuts, providing stimulus to their respective economies. Concurrently, the U.S. Dollar Index has fallen 10% YTD, its most severe decline since 2003, which amplifies returns on foreign assets for U.S. investors. Contrary to initial market fears, President Trump's aggressive trade rhetoric has culminated in new international trade agreements and contained tariffs with China, mitigating geopolitical risk. The outperformance is further highlighted by individual global stocks in sectors like defense and energy, such as South Korea's Doosan Enerbility (+273%) and Germany's Rheinmetall (+154%), which are substantially outpacing top-performing U.S. technology stocks.

Key Decisions for Investors

• Investors should re-evaluate their geographic allocations, as the sustained outperformance of international equities, driven by fundamental shifts in monetary policy and currency trends, suggests the long-term cycle of U.S. market leadership may be reversing.
• Monitor the U.S. Dollar Index and Federal Reserve policy closely, as a rebound in the dollar or a hawkish shift from the Fed would present a significant headwind to the profitability of the non-U.S. equity thesis.
• Consider targeted exposure to non-U.S. sectors demonstrating exceptional strength, such as defense, industrial manufacturing, and commodities, which are currently leading the global rally and showing substantially higher returns than broad market indices.