If you’re a stock market investor you’re probably feeling pretty good about how your US equity portfolio has fared in the first year of President Trump’s term.
All the major stock market indices seemed to be firing on all cylinders, with the Standard & Poor’s 500 index gaining 17.9% over the course of the year.
But if you’re the type of investor who looks for things to regret, look no further than the rest of the world’s stock markets. That’s because foreign markets did better than the US market in 2025 – at least. The MSCI World ex-USA index – that is, all stock markets outside the US – gained more than 35 percent last year, almost twice the percentage gain of the US market.
That’s a big departure from what has happened recently. Since 2013, the MSCI US index has bested the non-US index every year except for 2017 and 2022, sometimes by a wide margin – in 2024, for example, the US index gained 24.6%, while the non-US market gained only 4.7%.
Trump’s trade is dead. Long live the anti-Trump trade.
—Katie Martin, Financial Times
Broken down in individual country markets (again by MSCI indices), in 2025 the US took 21st place out of 23 developed markets, with only New Zealand and Denmark doing better. Leading the pack were Austria and Spain, with 86% achieved, but the highest records were set by Finland, Ireland and Hong Kong, with 50% or more; and the Netherlands, Norway, Britain and Japan, with gains of 40% or more.
Investment analysts cite several factors that explain this trend. Judging by traditional metrics like the price/earnings ratio, the US stock market is now more expensive than the rest of the world. Of course, he is historically expensive. The Standard & Poor’s 500 index traded in 2025 at 23 times expected to acquire companies; the historical average is 18 times earnings.
Investment managers are also concerned about the convergence of market access within the US technology sector, particularly in companies involved in intellectual property R&D. Fears that AI is an investment bubble that could topple the S&P highs have investors looking elsewhere for returns.
But one thing is repeated in almost every market analysis that tracks the performance of US and non-US markets: Donald Trump.
Investors began 2025 with optimism about Trump’s influence on the trade opportunity, given his apparent commitment to deregulation and his pride about America’s dominant position in the world and his determination to maintain, even expand.
That hasn’t been the case for months.
“Trump trade is dead. Long live Trump trade,” Katie Martin of the Financial Times wrote this week. “Everywhere you look in the financial markets, you see signs that global investors are going out of their way to protect Donald Trump’s America.”
Two of Trump’s policy measures are often cited by investment experts. One, of course, is Trump’s one-off tariffs, which have left investors without the ability to analyze the course of international trade. The Supreme Court’s sweeping tax amnesty and the chaos of his response, which included the imposition of new rates of 10% across the board and the threat of an increase to 15%, did nothing to calm investors’ nerves.
Then again, Trump is driving down the value of the dollar through his insistence on low interest rates, among other policies. For overseas investors, a weak dollar makes US goods more expensive compared to foreign ones.
It would be one thing if trade flows and the value of the dollar reflected economic conditions that investors themselves could explain in creating a picture of investment opportunities. Not so now. “The current instability is man-made (mostly by one man in orange) but it could continue until the US mid-term elections in November,” Sam Burns of Mill Street Research wrote on December 29.
Trump has not been shy about trumpeting the US stock market he has found as signs of his wisdom. “The stock market has hit 53 record highs since the election,” he said in his State of the Union address on Tuesday. “Think about that, just one year, adding to the pensions, 401(k)s and retirement accounts of millions and millions of Americans.”
Trump said: “Since I took office, the 401(k) has gone up by about $30,000. This is a lot of money. …Because the stock market has done well, setting all records, your 401(k)s have gone up.”
Trump’s numbers do not match the earnings of retirement workers such as 401(k) administrators at Bank of America. They said that the average checking account will increase by only $10,300 in 2025. I asked the White House what Trump said, but I haven’t heard back.
Interpreting stock market returns as economic indicators is a magician’s game. However, in his recent appearance before the House, Atty. Gen. Pam Bondi tried to deflect questions about her handling of the Jeffrey Epstein documents by talking about them.
“The Dow is over 50,000 right now,” he said. “American 401(k)s and pensions are booming. That’s what we should be talking about.”
I predicted that the administration would use the break of the Dow industry above 50,000 to say that “the entire economy is firing on all cylinders, because of his policies.” The Dow reached that mark on February 6. But February 11, the day of Bondi’s testimony, was the last day the index closed above 50,000. On Thursday, it closed at 49,499.50, or about 1.4% below the Feb. 10 peak close of 50,188.14.
To use a metric proposed by economist Justin Wolfers of the University of Michigan, if you invested $48,488 in the Dow on the day Trump took office last year, when the Dow closed at 48,448 points, you would have earned $50,000 in Feb. 6. That’s a profit of 3.2%. But if you had invested the same amount in the world market excluding the US (based on the MSCI World ex-USA index), on the same day you would have earned $60. That’s a gain of about 24%.
Broad market indices tell the same story. From January 17, 2025, the last day before Trump’s inauguration, to the end of Thursday, the MSCI US stock index gained 16.3%. But the national index minus The US got almost 42%.
The gap between US and non-US trends has continued into the current year. The S&P 500 has gained about 0.74% this year through Wednesday, while the MSCI World ex-USA index has gained about 8.9%. That’s “the best start to a calendar year for global stocks tied to the S&P 500 going back to about 1996,” Morningstar reports.
It would not be unusual for the gap between US and global markets to narrow or even reverse over the course of this year.
That’s what happened in 2017, when overseas markets as tracked by MSCI beat the US by more than 3 percent, and 2022, when global markets lost money but US markets fell globally by more than 5 percentage points.
Economic conditions change, and often the stock market marches to the beat of the drummer. One thing that won’t change is that Trump must remain president until January 20, 2029. Make your investment bets accordingly.
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