Ironically, since November 2024, the “America First” fiscal policy has coincided with the U.S. stock market’s underperformance relative to global markets. In contrast, European and Chinese equities have demonstrated superior performance during this period.
Our conservative investment strategy recommends maintaining the bulk of investments in short-term Treasury bills. For younger investors with a longer time horizon, diversifying into foreign stocks through ETFs and index funds may be an attractive addition to your portfolio. For instance, the iShares Core MSCI Europe ETF (IEUR) and the Vanguard FTSE Europe ETF (VGK) offer exposure to European markets.
Since November 2024, China’s stock markets have outperformed U.S. markets. The iShares China Large-Cap ETF (FXI) is currently trading at $35.04, reflecting a positive trend. In contrast, the SPDR S&P 500 ETF Trust (SPY) is trading at $609.70, indicating relatively flat performance. This divergence is attributed to several factors including AI and US fiscal policy. The US’s protectionist policies of AI have backfired. AI is a potential $200 billion game changer for Chinese markets in 2025, widespread AI adoption could boost Chinese earnings per share by 2.5% annually over the next decade. Also, the U.S. dollar’s rally has stalled as investors reinterpret President Trump’s threats of tariffs as negotiation tactics. This has benefited emerging markets, including China, as a weaker dollar makes their exports more competitive.
It’s essential to conduct thorough research and consider your individual risk tolerance before adjusting your investment portfolio.