Trump’s First Year in Office: U.S. Stocks Lag Behind Global Markets, China and Europe Overtake Comprehensively!

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A year ago, investors widely believed that if Trump won the presidential election, his tariff threats and tax cuts would cause international stock markets to underperform the United States. However, global markets are now experiencing a historic reversal.

Since Trump won the election last November, China, Europe, and Canada's major stock indexes, measured in U.S. dollars, have all outperformed the S&P 500. The MSCI Global (ex-US) stock index's lead over Wall Street's benchmark this year has reached its highest level since 2009.

In the first year of Trump's second term, investors have flocked to global stock markets. Initially, this was to hedge against possible U.S. stock market volatility from his chaotic tariff policies; later, it shifted to seeking more attractive valuations as alternatives to the S&P 500. This trend has validated the forward-looking views of strategists such as Goldman Sachs’ Peter Oppenheimer and Bank of America’s Michael Hartnett in 2024—they advised investors to look outside the U.S. at that time.

Hartnett currently points out that, although the global market’s outperformance may slow as U.S. corporate earnings strengthen and bond yields fall, he remains optimistic about international markets going forward.

Asian Equity Markets Benefit from AI Supply Chain Position

Asian stock markets have stood out in particular, thanks to the region’s central role in the AI supply chain. Chipmakers, foundries, and equipment leaders such as TSMC, Samsung Electronics, and Tokyo Electron have driven the overall rally.

South Korea’s Kospi index has surged 55% over the past year, leading Asia’s major markets and highlighting its status as the region’s most attractive AI investment destination.

Xin-Yao Ng, a fund manager at Aberdeen Investments, said:

"I wouldn’t be surprised to see a pullback at the end of the year because the market has been momentum-driven, and after such a strong rally, some funds will want to lock in profits before year-end. I still think there’s potential for the rally to continue, though I’m not sure how long it can last—the risks are definitely rising."

With valuations already at high levels, the next stage of gains will depend on whether companies can deliver on the earnings promises brought by AI investment, whether capital expenditure trends can be sustained through 2026, and whether Trump adopts a cooperative attitude on trade policy.

Europe Outperforms Expectations, Limited Tariff Impact

Europe’s markets have far exceeded expectations.

On one hand, Europe’s economic indicators have rebounded, inflation is under control, and the European Central Bank has lowered interest rates to 2%, well below U.S. levels. On the other hand, the European Union, especially Germany, is ramping up defense and infrastructure spending for the next decade. The positive effects are expected to start showing by the end of this year, boosting financial, defense, and energy transition stocks.

In addition to loose fiscal and monetary policy, European companies have effectively mitigated tariff impacts through price hikes, cost reductions, and direct industry or corporate-level trade negotiations with the Trump administration. For example, pharmaceutical companies Novartis and Roche have negotiated with the U.S. over drug price cuts and committed billions of dollars in investment in exchange for the postponement of impending industry tariffs. The UK’s AstraZeneca reached a similar agreement in October.

Florian Allain of Mandarine Gestion said:

"Looking ahead, I expect Germany’s stimulus plan to accelerate European economic growth, narrowing the growth gap between Europe and the U.S."

Canadian Stock Market Outperforms the U.S. for the First Time in a Decade

Since early April, Canadian stocks have experienced a strong rally. The S&P/TSX Composite Index has risen 23% since the election, and is set to outperform the U.S. stock market in a bull run for the first time since 2010.

Philip Petursson of IGM Wealth Management said:

“Earnings growth here (in Canada) will be as strong as in the U.S., but at a better price. By price-to-earnings ratio, I can buy stocks with the same earnings power as the S&P 500 for two-thirds the price.”

Risk Warning and DisclaimerThe market carries risk and investments should be made cautiously. This article does not constitute personal investment advice, nor does it take into account the unique investment objectives, financial conditions, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article are appropriate to their particular circumstances. Investing accordingly is at your own risk. ```