S&P 500 Outpaces Global Peers Despite Trump Tariffs

The S&P 500 index has shown significant recovery, closing in on its global peers after a challenging start to 2025. This turnaround is notable as it comes despite escalating trade tensions under President Donald Trump. The US index has now surpassed major global ETFs that had previously led the market, including those linked to Europe, emerging markets, and ex-US world stocks.

This shift is particularly evident in July, where the S&P 500 is outperforming non-US assets. Investors who had diversified their portfolios to include international markets are now seeing the S&P 500 take the lead. This reversal is significant given the recent trade actions by the Trump administration, which have targeted countries like Brazil and Canada with substantial tariffs.

The iShares MSCI Brazil ETF and the iShares MSCI Canada ETF, which had outperformed the S&P 500 earlier in the year, are now experiencing declines. The Brazilian ETF is down 4.6% in July alone, following a 50% tariff imposed by the US on Brazilian imports. Similarly, the Canadian ETF is also falling behind due to trade retaliation from Washington. These actions have emboldened the Trump administration to escalate trade measures, according to Ulrike Hoffmann-Burchardi, Chief Investment Officer for the Americas and Global Head of Equities at UBS Global Wealth Management.

Despite these trade tensions, the S&P 500 remains resilient. The index's heavy exposure to sectors like technology, which are less directly affected by tariffs, provides a cushion against the impact of trade actions. This insulation allows the S&P 500 to maintain its value and even climb higher, as predicted by Ulrike, who forecasts the index reaching 6,500 by June next year, representing a 4% rise from its position at the end of last week.

During the first half of 2025, foreign markets had outperformed the S&P 500, a rare occurrence given the decade-long dominance of US markets. However, by July, the S&P 500 has regained its footing, outpacing global ETFs that had previously led. This comeback puts pressure on global funds that were seen as safe bets in a volatile election year. The new tariffs imposed by the Trump administration are causing more damage abroad than at home, at least in the short term.

Investors with diversified portfolios may feel the squeeze more than those who remained invested in the core US index. With the S&P 500's strong performance, the bet on the US index is looking more appealing, even with occasional market swings. The American stock market is currently running hot, and unless there are drastic changes, July could mark the point where the US fully reclaims its lead from the rest of the world.