As Donald Trump puts America first, the rest of the world fights back

Vijay Valecha, The National, March 5, 2025

US shares surged to record highs after Donald Trump won the US presidential election in November, but the rally has faded in 2025. Stock markets famously hate uncertainty, and the only certainty about Mr Trump's second term is that we will get plenty of that.

Markets fear tariffs on Mexico, Canada, China and the EU could rebound on the US, driving up prices, hitting demand and causing a recession. A slowdown would punish international investors too, many drawn by the success of US tech mega-caps.

In addition to the higher U.S. inventories, import tariffs announced by the Trump administration could impact oil prices by raising the cost of consumer goods, weakening the global economy and reducing fuel demand. Concerns about European and Chinese demand also supported the decline in oil prices. Investors are concerned about the global economic outlook as the U.S. president dismantles the nation’s free-trade structure with plans to impose 25 percent tariffs on car imports to the U.S. In the Middle East, further easing in geopolitical tensions could also weigh on oil prices by reducing the risk of further supply disruption.

The S&P 500 is trailing this year, closing at 5,954.5 on February 28, up just 1.46 per cent year to date. In contrast, the FTSE 100 is up 6.7 per cent, the Euro Stoxx 50 is 11 per cent higher, and Hong Kong’s Hang Seng has risen 17 per cent.

The US has been the worst-performing major market over the past three months, moving sideways as the November’s “Trump bump” fades, says Tom Stevenson, investment director at Fidelity International. “The post-election consensus that ‘America first’ would mean ‘rest of the world second’ has, in stock market terms, been wrong.”

Vijay Valecha, chief investment officer at Century Financial, says a potential peace deal in Ukraine has created “bullish euphoria buying in Europe among some European investors”, particularly in France and Germany. “China is outperforming due to a big uptick in Chinese tech names after the DeepSeek-related narrative, although ongoing property market issues could delay the recovery.”

Investors could up their exposure to these two regions through broad-based exchange-traded funds (ETFs) such as FTSE Developed Europe or MSCI Europe, or the HSBC MSCI China UCITS ETF or iShares MSCI China UCITS ETF.

Mr Valecha also highlights three more ETFs that could offer diversification. The iShares MSCI ACWI ETF invests in a spread of large to mid-cap stocks from top developed and emerging markets. While the US has outpaced all other major developed markets, this ETF can hold its head up. The ETF is still 65 per cent invested in the US, with the remainder spread between Japan, the UK, China, Canada, Europe, Taiwan, India and Australia.

The gold price has climbed another 10 per cent this year to about $2,863 an ounce and Mr Valecha recommends exposure through the SPDR Gold Shares ETF. “As Russia and China dump US Treasuries for gold-based physical bullion holdings, gold remains a good diversification bet.”

Meanwhile, the iShares 20+ Year Treasury Bond ETF is “often cited as the most underrated ETF of all”, he says. “During market turmoil or a recession, long-term Treasury bonds tend to rally as investors seek safe havens. If Fed interest rate cuts materialise or we face a recession, the ETF could enjoy sizeable gains.”

America has been first for years. But investors should not write off the rest of the world just yet.

Source

The National