The End of (U.S. Stock Market) Exceptionalism?
May 1, 2025

The introduction of the Trump administration’s tariffs and trade policy sent shockwaves through global markets as the intent is to shift global trade dynamics. Is the relative performance between U.S. stocks and global stocks ex-U.S resulting in another stunning shift from what we have experienced over the past few decades of U.S. stock market dominance to a new market paradigm?
The stock market performance thus far in 2025 begs the question: Is this the end of U.S. stock market exceptionalism? For a time, it seemed as if America was the only place to invest as U.S. growth company results surged past nearly every ex-U.S. company. A few months ago, the concern was that the markets had become too concentrated in the Magnificent Seven.
However, in 2025, the Trump administration appears to be intent on shaking up the underpinnings of what worked from a market perspective for the past few decades. Furthermore, the administration has adopted a firm and sometimes confrontational approach toward trading partners. Its punitive reciprocal tariffs are punishing many companies, but some believe none more than U.S. businesses, at least in the short term. Management teams are operating in a “fog of tariffs,” not knowing what the actual tariff rate is or will be. As a result, capital decisions are being delayed as we all await the next tariff headline.
Key Takeaway
The markets dislike uncertainty. Earnings reports are usually followed by forward guidance, which helps investors discern a company’s outlook from a sales and profitability standpoint. Given the recent trade policy proposals, more and more companies are pulling guidance due to not knowing how their businesses will perform in an environment where the rules are changing daily. The longer this uncertainty continues, the more the markets could be exposed to volatility and poor outcomes.
So, how do we invest in this type of market? The key in my opinion, as always, is to seek a margin of safety — solid balance sheets, stable operating margins through a full cycle and previously volatile times and great management teams. Through bottom-up research, we can attempt to uncover those companies that might not be as exposed to or might even benefit from an environment where U.S. tariffs prevail. We must also keep an open mind and prepare for contrarian investments in companies that have performed poorly. If the tariff news improves, there may be some value created for those names as well.
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