Will Tariffs Derail The Bull Run In Global Equities Ex-U.S.?

Global equities performance this year has been significantly driven by the allocation to non-US stocks, which have outperformed the US market as of July 11. This trend, however, faces a potential headwind from increasingly likely higher US tariffs, which could disrupt the current bull run in ex-US global equities.

Analysis

The pivotal factor driving global equity portfolio performance this year has been the strategic allocation between US and non-US stocks. Data as of July 11 indicates that strategies overweighting foreign equities have yielded superior returns, with the US market lagging its global counterparts. However, this established trend is now confronted by a significant geopolitical headwind: the increasing likelihood of higher US tariffs. This specific risk, highlighted by the article's cautious tone and themes of trade policy and politics, threatens to derail the ongoing bull run in ex-US equities and could invalidate the year's most successful allocation theme. The situation presents a clear conflict between current market momentum and emerging political risk.

Key Decisions for Investors

• Investors holding overweight positions in non-US equities should consider the growing risk of US tariffs, which could erode or reverse recent outperformance.
• Monitor US political rhetoric and formal trade policy announcements closely, as these are the primary catalysts identified that could shift market leadership back towards the US or induce broad volatility.
• It may be prudent to evaluate hedging strategies or rebalance allocations to a more neutral stance between US and foreign equities until there is greater clarity on future trade policy.