How the US market fell from 4th to 41st for returns – and what it means for stocks in 2025
NEARLY two months after US President Donald Trump roiled markets with his on-again, off-again 'reciprocal' tariffs and universal 10 per cent levy, uncertainty remains. My last column showed the illogic underpinning this – and counselled patience. Here is an update – and how to profit.
Trump says America 'wins' through his tariffs, reclaiming 'lost' manufacturing jobs and cutting the trade deficit. No. Tariffs always hammer most the one who imposes them. Don't take my word for it. Look to the markets. For any good capitalist, this is step one. Markets are a lie detector, weighing talk, forecasts and opinions – and rendering verdicts.
Non-US stocks were up 8.8 per cent this year to May 22. The Straits Times Index gained 4.9 per cent, a hair's breadth from all-time highs. China? Up 10 per cent. European stocks rose 13.7 per cent. Mexico, up 20.7 per cent. US stocks? Down 5.5 per cent – a striking lag.
If we look at it another way: Of the 47 MSCI All-Country World Index (ACWI) nations, America was 41st in the ranking of countries by their year-to-date returns as at May 22. In the same period last year, America was fourth – with its 28.8 per cent return fully seven percentage points ahead of the ACWI.
Why did US stocks go from No 4 to 41? The answer is No 47; the 47th president, that is. Trump's vacillations make funds flee America.
Markets know that attempts to reduce the trade deficit are senseless. A trade deficit means a capital account surplus by definition – that capital is foreign investment in the US.
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Why would reversing that be desirable? Why would the government intervening to favour American firms, instead of letting free markets sort out the most efficient use of capital, be considered positive? Why would policy that seemingly changes on a whim be considered good?
Stocks are seeing through the smoke and mirrors. America's lag tells you those things are bad, not good.
My last column noted how Trump justified his 90-day reciprocal tariff pause on Apr 9 on the grounds that some 75 nations sought deals. Many claimed that this revealed Trump's true aim.
The president's fans could say that tariffs, confusion and uncertainty are solely a leverage to strike a flurry of deals – delivering even freer trade. However, the markets are looking at reality, not armchair psychobabble.
Deals to make more deals
Since Apr 9, just two tariff 'deals' have emerged – one with Britain and one with China. Both are fluff.
Britain's is a one-year, non-binding agreement to mitigate tariffs until a full trade deal happens. A deal to make a deal. It affects only a handful of industries. Crucially, the 10 per cent universal levy remains on most UK goods, just like for those from Singapore.
America's China deal looks bigger, but only because the bar was incredibly low. Yes, it cut 145 per cent tariffs on Chinese goods to 30 per cent, while China dropped retaliatory levies from 125 per cent to 10 per cent. However, the 'deal' lasts only 90 days and effectively just buys time. Another deal to make a deal.
Plus, tariffs on China remain 30 percentage points higher than in January. Both countries are worse off, but especially America. Who wins from this? Maybe Singapore, via re-exporting.
On May 16, Trump flip-flopped again. Boasting that 150 nations now seek 'deals', he said that there isn't time to negotiate them all. His 'solution'? Telling nations what rates they will pay – and offering chances to appeal.
Didn't he already do that on 'Liberation Day' on Apr 2? How will it work? Will rates be higher, lower or the same as those on Apr 2? He did not say, further fanning uncertainty.
Then, days later, he threatened the European Union with new 50 per cent tariffs – and 25 per cent on Apple products. More uncertainty.
Meanwhile, legal challenges to Trump's tariffs progress. Maybe real deals will come that will actually lower trade barriers and uncertainty – a huge potential upside. Then again, maybe not.
But as my last column said, even if all tariffs return, the pain will be less than feared – which will be bullish for markets. Importers can readily skirt America's understaffed, overwhelmed tariff-collecting Customs and Border Protection staff via both illegal and legal means.
The latter include 'tariff splitting' – stripping out services-related costs such as marketing to reduce goods' values – or storing imports in bonded warehouses. Or, shipping in goods that are valued to be under US$800. And myriad illegal ways such as misclassifying and undervaluing goods.
Or, as mentioned, exporters can 'tranship' or re-export via lower-tariff nations – such as Singapore. This is why China's April exports didn't tank despite shipments to America tumbling 21 per cent.
South-east Asia gobbled up the difference – and shipped them on. It drove Singapore's huge, 113 per cent year-on-year spike in April re-exports to America. Vietnam and Taiwan are seeing similar surges. Shippers could further tap Canada or Mexico, gaming the US-Mexico-Canada Agreement's tariff exemption.
Hence, while April's total tariff collections rose, they missed administration forecasts by 75 per cent. That will persist.
Happily, fear exceeds the negative effects, especially outside America. For investors, that is a recipe for a bull market – with non-US stocks continuing to lead.
The writer is the founder, executive chairman and co-chief investment officer of Fisher Investments, an independent investment adviser serving both individual and institutional investors globally
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