It might be time for investors to look past the US stock market
After years of dominating global markets, the US stock market has suddenly gone haywire. The S&P 500 index returned more than 20 per cent in each of the past two years and some kind of slowdown was inevitable, but not like this. The sell-off began in earnest on April 2, when US President Donald Trump unleashed his 'Liberation Day' trade tariff blitz and wiped 20 per cent off US share values. His 90-day pause on April 9 triggered a relief rally, reducing this year's S&P 500 losses to only 5 per cent, but it's been a bruising experience and given Mr Trump's haphazard strategy, investors don't know what to expect next. Many investors will have outsize exposure to the country's fortunes after its stellar run of the past 15 years, but is it finally time to look past America? Others may be wondering whether now is a good time to pick up US shares at a reduced point but here's a word of warning. They're still not cheap, with the S&P 500 trading at about 20 times forecast earnings, a premium to the MSCI All Country World Index at 16 times. Like many, Jason Hollands, managing director at investment platform Bestinvest by Evelyn Partners, is wary of the US. While some of the 'valuation froth' has been removed, Wall Street is still far from cheap and is 'lurching from day to day'. Company earnings forecasts have yet to catch up with the likely impact of tariffs, he adds. 'Even with baseline tariffs of 10 per cent, there is going to be some form of negative impact. Despite the talk, no deals have been announced.' The trade war threatens to disrupt supply chains, while freight disruption could fuel inflation, and Mr Trump is still talking tough on China. Investors should brace themselves for a volatile summer, Mr Hollands says. 'It is way too soon to assume the current de-escalation rally is an all-clear for US markets.' Instead, he recommends diversifying. 'The waning of the 'American exceptionalism' theme may provide an opportunity for a more balanced approach to global investing. Europe is now back on my radar,' Mr Hollands says. Tony Hallside, chief executive at Dubai-based investment brokers STP Partners, says the US is in a spot but hasn't lost its way entirely. 'Unemployment is still near historic lows and corporate balance sheets are broadly strong.' Yet he's also wary, given 'elevated valuations, geopolitical frictions and an increasingly complex monetary policy path', as Mr Trump pressures the US Federal Reserve to cut its funds rate from today's 4.5 per cent. Mr Hallside also says the S&P 500 suffers from 'concentration risk'. 'The Magnificent Seven tech stocks account for more than 30 per cent of the index, skewing valuations and masking broader market softness. 'The US is not broken but it may not be where value lies today.' Instead, he sees opportunities in Europe, where inflation is cooling and the European Central Bank (ECB) has cut rates to only 2.25 per cent. 'That's supportive for equities, particularly cyclicals and small caps,' Mr Hallside says. Japan also looks compelling as corporate reforms drive shareholder value. Emerging markets could shine if the dollar weakens, he adds. Paul Jackson, global head of asset allocation research at fund manager Invesco, is now underweight US stocks as valuations still look stretched and a recession potentially looms. 'There are better opportunities elsewhere, notably China and Europe.' Europe could benefit from the ECB's easier monetary stance. 'The ECB is well ahead of the Fed on rate cuts, which could boost asset prices,' he says, but adds there's a risk that US tariffs could still export inflation back to Europe. Mr Jackson also sees promise in the UK, where valuations are closer to historical norms. 'The UK stock market has outperformed the US so far during 2025,' he says. UK interest rates are relatively high at 4.5 per cent but with Mr Trump going relatively easy on UK tariffs, the Bank of England may be able to cut rates more aggressively without triggering inflation, he says. Mr Jackson flags the Japanese yen as 'extremely cheap at the moment'. 'That's good news for overseas investors but brings the risk that stock prices will underperform as the yen recovers.' The S&P 500 has clawed its way back from its post-Liberation Day lows but market jitters will remain, says Vijay Valecha, chief investment officer at Century Financial. Europe is benefitting from monetary easing and valuations are attractive, but the continent still faces tariff risks. 'Key export sectors like industrials, cars and luxury goods could face serious earnings pressure if Trump does introduce 20 per cent tariffs on the EU.' The UK stands out for its dividend income. 'The FTSE 100 is expected to return £83 billion [$110.46 billion] to shareholders in 2025, with a total cash yield of 5.2 per cent, including share buy-backs. UK markets are less vulnerable to tariffs and could benefit from more interest rate cuts,' Mr Valecha says. He highlights the relative value of Japan, South Korea and India. Japan trades at a trailing P/E of only 17.8, below its three-year average, while Korea and India are also attractively valued and delivering positive returns. 'All three are proving resilient,' he says. Mr Valecha sees long-term promise in emerging markets, driven by dollar weakness and global capital rotation. 'In the coming years, a significant shift in global economic momentum away from the US and towards Asia and Europe can be expected.' However, Chris Beauchamp, chief market analyst at trading platform IG, believes it's too early to write off the US. Yes, it may look expensive, but there's a reason for that. 'This reflects the fact that companies generate higher earnings, so their shares cost more as a result.' The US has delivered spectacular returns and corrections are part of the deal. 'If you want to benefit from those gains, you also have to accept what we are going through today,' Mr Beauchamp says. A recession is possible, although Mr Beauchamp suggests it may be more like the brief Covid-triggered downturn of 2020 than the deep crash of 2008. 'If US share values fall, inflation is driven out and public sector spending is cut, that could drive flows into the private sector and unleash the next rebound. It's a process the US has been through again and again.' Mr Beauchamp notes that after the election, markets priced in post-Trump euphoria. Today, it's apocalypse. Investors need to keep their nerve both through the ups and the downs. 'The US commands 70 per cent of global market capitalisation, so you can't just ignore it. Ultimately, there is no safe-haven in equities. Investors just have to stick it out,' he says.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
UAE Moments
an hour ago
- UAE Moments
♑ Capricorn: Daily Horoscope for June 22, 2025
Today, Capricorn, the universe invites you to find harmony between your personal desires and professional duties. The Sun square Saturn aspect may present challenges, but remember, every obstacle is an opportunity for growth. Love Horoscope Today, dear Capricorn, love may feel like a gentle breeze that refreshes your spirit. With the Moon's conjunction with Venus, your heart is open to tender connections. Whether single or in a relationship, take time to appreciate the beauty in small gestures. A shared laugh or a simple 'I love you' can work wonders. Remember, love is not always about grand gestures but the little things that make your heart flutter. Embrace vulnerability and let your loved ones know how much they mean to you. Career Horoscope At work, Capricorn, your pragmatic nature will be your greatest asset today. The Moon's influence encourages you to communicate effectively and collaborate with colleagues. It's a day to focus on teamwork and building strong professional relationships. Be open to new ideas and approaches, as they may lead to innovative solutions. Remember, your determination and discipline are admired by those around you. Keep your goals in sight, but also be flexible and adaptable to changes. Success is within reach if you stay committed and open-minded. Health Horoscope Your well-being today is influenced by the Moon's transition into Gemini, bringing a lightness to your step. It's a perfect day to explore new activities that stimulate both body and mind. Consider trying a dance class or a new form of exercise that challenges you in a fun way. Remember, well-being is not just physical but also mental. Take a moment to meditate or practice mindfulness, allowing yourself to connect with the universe and recharge your spirit. Balance is key, so listen to your body's needs. Finance Horoscope Financially, Capricorn, today is a day to practice caution and foresight. With the Sun square Saturn, it's important to balance your desires with your responsibilities. Avoid impulsive purchases and focus on long-term goals. Consider reviewing your budget and making adjustments where necessary. This is a good time to plan for future investments or savings. Remember, financial security is built over time, and your disciplined approach will pay off. Trust in your ability to manage your resources wisely.
UAE Moments
an hour ago
- UAE Moments
Your Career Horoscope for June 21, 2025
Find daily astrological predictions for all sun signs for June 21. We recommend reading the horoscopes for your rising sign. Aries Career Horoscope The Moon not only returns for its only visit to your income sector while Venus, the planet of money is here but its first since Mars returned to your work sector earlier in the week. This will see the Moon spend its early hours at a friendly aspect to Mars and just as Venus moves into her final two weeks, this ordinary chance that you get every four weeks to sharpen your nose for money and act as a trigger, comes just as things are ripe with potential on the income and job fronts. Taurus Career Horoscope As the Sun leaves your income sector, for now this ends the support that has been there for Pluto in your career sector. Since Jupiter returned to your income sector in May 2024, no planet has returned to your income sector without spending its early days at a friendly aspect to Mars, something that Venus, the planet of money will do when she returns in two weeks. Mars will do the same when he returns to your work sector in six weeks, with the best still to come. Gemini Career Horoscope Mercury, who returned to your income sector last week but will leave again next week, is still separating from a friendly aspect to Juno on the job front, when he moves into another to the North Node in your career sector. This is expanding on what has already been a good week across the income, work and career fronts and is what will greet the Sun when his return to your income sector today shifts the solar spotlight onto your income situation, matters and options. Click here to follow our WhatsApp channel for tarot readings, love, health, career, and Chinese horoscopes delivered to your phone daily! Cancer Career Horoscope Since returning to your career sector two days ago, the Moon has aligned with three of the five planets here, all of them newcomers and all of them set to reshape the rest of this professional year and beyond. Before leaving today, the Moon will spend its final hours aligned with the two planets that have been here for years, leaving you with your professional instincts sharp and more emotionally and intuitively engaged and aware, but also with a chance to get back to basics. Leo Career Horoscope The Moon's return to your career sector today might be an ordinary monthly event and something that every four weeks can sharpen your professional instincts, act as a trigger and ensure you are emotionally and intuitively engaged and aware, it comes just as you are moving into a pivotal 16 days on the income and career fronts. Things kick off with the Moon's friendly aspect to Mars in your work sector, as it makes its only visit while Venus, the planet of money is working to steer this professional year in a lucrative direction. Virgo Career Horoscope While the Sun's departure from your career sector today is the point when, on the June solstice each year, the solar spotlight will always shift off your career and professional situation, matters and options, this is far from the end of the story. While after Jupiter left last week this will leave your career sector empty for the first time since May 2024, with a chance to step back and process the journey so far, before in 14 days an even bigger chapter begins. Libra Career Horoscope The Sun's return to your career sector today is the point when, on the June solstice each year, the solar spotlight will always shift onto your career and professional situation, matters and options. However, this is the only thing ordinary about this, with the Sun not only returning to find that lucky Jupiter returned last week, but as you embark on your most powerful professional year in over a decade, the stars are already aligned across the income, work and career fronts. Scorpio Career Horoscope Since returning to your work sector two days ago, the Moon has already aligned with three of the five planets in your work sector, all of them newcomers and all with the power to change things up. Before leaving today, the Moon will spend its final hours aligned with the two planets that have been here for years. Four days after Mars left your career sector, this is a chance to get back to basics while leaving you with your instincts sharp and a download of information to unpack. Sagittarius Career Horoscope As the Moon returns for its only visit to your work sector while Venus is here and 16 days before Uranus' six year transit is due to end, things kick off with a friendly aspect to Mars, four days after his return to your career sector. As you move into some of the most pivotal weeks of this professional year, the Moon returns to sharpen your instincts and bring all the different threads together. Capricorn Career Horoscope The Sun's departure from your work sector today is something that on the June solstice each year will always take the solar spotlight off your work situation and job matters. While this will leave your work sector empty, only for 14 days until Venus returns to usher in the next chapter. Until then, after Jupiter left and ended his nearly 13 month visit last week, there is a chance to first stand back and unpack the journey so far. Aquarius Career Horoscope While the Sun will always return to your work sector on the June solstice and this is the point in each year that the solar spotlight will always shift onto your work situation and job matters, from the start it will be clear that everything has changed. As well as returning to find Jupiter, the planet of luck and expansion here for the first time in over a decade, with the stars aligned on income, work and career fronts in a way not normally seen at this time of year. Pisces Career Horoscope In between Mars' departure from your work sector earlier in the week, Mercury's return next week and with the impact from last week's Full Moon on the career front still playing out, the Moon is wrapping up a visit to your income sector that has brought a chance to focus on the money. An alignment with the five planets here will leave you with more than just a sharp nose for money, with a read on where the money is set to make all the difference when things start up again on the job front next week.
UAE Moments
an hour ago
- UAE Moments
♍ Virgo: Daily Horoscope for June 22, 2025
Today, Virgo, the universe invites you to embrace the power of transformation. With Mars in your sign sextile Jupiter, you're filled with confidence and drive. This is your moment to shine and pursue your passions with vigor. Love Horoscope Today, Virgo, the stars encourage you to open your heart and embrace the warmth of connection. With the Moon's conjunction with Venus, love is in the air, and it's a perfect time to express your feelings. Whether you're single or in a relationship, take a moment to appreciate the beauty of love in its many forms. A simple gesture, like a heartfelt note or a spontaneous hug, can speak volumes. Remember, love is not just about grand gestures but also about the small, everyday moments that bring joy and warmth to your heart. Career Horoscope In the realm of work, Virgo, the cosmic energies are in your favor. The Moon's sextile with Mercury enhances your communication skills, making it an ideal day for presentations, negotiations, or team collaborations. Your attention to detail and logical approach will be appreciated by colleagues and superiors alike. Don't be afraid to share your innovative ideas, as they could lead to significant advancements. Remember, teamwork makes the dream work, so foster a spirit of collaboration and watch as your professional endeavors flourish. Health Horoscope Your well-being is highlighted today, Virgo, as the Moon's transition into Gemini invites you to explore new ways to nurture your body and mind. Consider trying a new form of exercise or meditation that challenges you in a fun and engaging way. It's a day to break free from routine and embrace the joy of movement and mindfulness. Remember, your well-being is a journey, not a destination, so take small steps that bring you closer to balance and harmony. A walk in nature or a dance class could be just what you need to lift your spirits. Finance Horoscope Financially, Virgo, the stars are aligned in your favor today. With Mars sextile Jupiter, you may find opportunities for growth and expansion in your financial endeavors. It's a great day to review your budget, explore new investment opportunities, or even negotiate a raise. Trust your instincts and take calculated risks that align with your long-term goals. Remember, financial success is not just about accumulating wealth but also about creating a stable and secure future. Stay grounded and practical, and you'll find the prosperity you seek. This article was previously published on bahrainmoments. To see the original article, click here
