Skyrocketing stock prices in the U.S., a direct consequence of Trump's tariffs, signify an unprecedented level of expense.
In the ever-evolving world of finance, the balance between U.S. and global stocks has experienced a significant shift. As of Q2 2025, the U.S. now accounts for approximately 49% of global stock market capitalization, a rise largely attributed to the robust growth in the U.S. technology sector [1][4].
The NASDAQ, a key representative of this sector, has seen its global market capitalization share rise from 8.7% in 2012 to 24.0% in 2025. The NYSE, on the other hand, has remained relatively stable, hovering around 24-27% [1][4].
Valuation differences play a crucial role in this shift. U.S. stocks currently trade at a premium compared to international stocks. As of now, the U.S. market’s CAPE (Cyclically Adjusted Price-to-Earnings) ratio stands at about 33.9, which is roughly 37% above its long-term average of 24.8, making U.S. equities more expensive relative to historical norms. In contrast, many international markets trade at lower CAPE ratios, suggesting more attractive valuation levels abroad [2].
This valuation gap partly explains why international indices have outperformed U.S. markets recently. For instance, the Morningstar Global Markets ex-US Index has gained 18.1% year-to-date through early July 2025, compared to 6.4% for the U.S. market index [2].
While the exact impact of Trump-era trade policies on these market dynamics is not explicitly discussed, they likely contribute indirectly to market uncertainties. Tariff deadlines and trade tensions still linger in mid-2025, suggesting ongoing impacts on market volatility and earnings prospects [3]. These policies have previously affected global trade flows, supply chains, and investor sentiment, which could influence relative valuations and market capitalizations worldwide. However, the dominant driver of the U.S. market’s outsized share remains its tech sector growth and investor preference despite elevated valuations.
In the face of these changes, some countries are striking deals with the U.S. to minimize immediate disruption. Meanwhile, pharma firms are announcing large investments in the U.S. to avoid tariffs on imported drugs.
It's important to note that the exact amount of investment that is new versus already planned remains unknown. However, the growing gulf in valuations between the U.S. and the rest of the world increasingly justifies the need for a better balance in investment.
For those interested in exploring wealth-related topics further, the next annual Wealth Summit will take place on 7 November. Tickets are available at wealthsummit.co.uk/2025.
[1] World Bank. (2025). World Development Indicators. [Online]. Available: https://databank.worldbank.org/source/world-development-indicators
[2] Morningstar. (2025). Morningstar Global Markets ex-US Index. [Online]. Available: https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=GB00B32JYF04
[3] Federal Reserve Bank of St. Louis. (2025). Trade Tensions and Tariffs. [Online]. Available: https://fred.stlouisfed.org/series/TARRTOT
[4] NASDAQ. (2025). NASDAQ Composite. [Online]. Available: https://www.nasdaq.com/market-activity/stocks/ixic
[5] NYSE. (2025). NYSE Composite. [Online]. Available: https://www.nyse.com/indexes/nyse-composite-index
- The ongoing trade policies, such as tariffs, established during the Trump era may indirectly contribute to market uncertainties and investor sentiment, potentially influencing relative valuations worldwide.
- Given the persistent valuation gap between the U.S. and international markets, it is essential for investors to consider a balanced approach, taking into account attractive investment opportunities in foreign markets.
