The dominance of US stocks is loosening! Trump's tariffs are pushing international stock markets to "greatness" again.

President Trump's tariff policy is significantly boosting the international stock market and helping to end the long-term global dominance of the S&P 500 index - at least for now. International stock markets are expected to outperform the S&P 500 index this year, marking the first time since 2022 and the first time since 2009 that international stocks have surpassed in a rising market. The main reason for this phenomenon is that the market is concerned that tariffs and trade uncertainty will have a greater impact on US corporate profit growth. Data shows that the MSCI Global Index, excluding the United States, has risen by 18% so far this year, well above the 7.8% increase in the S&P 500 index during the same period. When divided by different markets, the main stock index in Mexico has risen by 18%, Canada by 12%, Germany by 21%, Spain by 26%, Brazil by 14%, and the UK by 11%. This contrasts sharply with the surge in the US stock market in recent years. Previously, the US stock market had been climbing steadily driven by large tech stocks and the prospects of artificial intelligence, while other global markets performed relatively poorly, making stocks outside the US relatively cheaply valued. Craig Basinger, Chief Investment Strategist at Purpose Investments Inc, said, "Sometimes, the biggest returns come from those opportunities that have yet to be fixed." Craig Basinger said the valuation gap between the US and international stock markets is at a "historically high level," with investors generally over-allocated in the US market and under-allocated in other markets. This trend is beginning to reverse this year, and may accelerate with the implementation of Trump administration tariffs this month. Meanwhile, trading partners such as Canada, Europe, and Japan are also implementing investor-friendly reforms to boost their own economic growth. Craig Basinger said, "The speed of change in the market is important, and overall, it seems that the international stock market is becoming more investor-friendly." "The United States is still the gold standard, but if the gap narrows, the valuation gap may also narrow." David Lambert, Managing Director, Head of European Stocks, and Senior Portfolio Manager at RBC Global Asset Management, said that the previously considered "low-growth" prospects for European and Japanese stock markets are also changing. He said, "We are actually in an era where profit growth may gradually increase in the medium term. There is no reason to believe that gradual revaluation cannot continue over the next few years." A survey conducted by Bank of America Securities in June showed that 54% of fund managers surveyed expect international stocks to be the best performing asset over the next five years. Only 23% of fund managers held this view for the US stock market. David Groman, Head of Global Equity Strategies at Citi Research, said that the reason for this view is that Trump's tariffs are expected to have a greater impact on US corporate profits than on European or Japanese companies. According to a report issued by Citi to customers on Wednesday, the value and momentum performance of the European stock market are particularly leading. David Groman said, "In markets like Europe or Japan, investors can at least estimate the impact on earnings." He added that markets like Europe have already reflected the adverse effects of tariffs in stock prices, and the actual situation may be better than expected. However, some strategists believe that the pain in the US stock market may spread to other global markets. Emily Roland and Matthew Miskin, Co-Chief Investment Strategists at Manulife John Hancock, warn against holding low-quality, cyclical international stocks in this environment. They said, "Historically, every time the US enters a recession, it drags down the rest of the world as well." However, Craig Basinger said that the rotation from the US stock market to the international stock market could be "a very long process." He said, "People are too heavily invested in the US stock market."