U.S stocks rose in 2025, but thanks to Trump, foreign stocks did much better
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- Trump has crowed about the gains in the U.S. stock market during his term, but in 2025 investors saw more opportunity in the rest of the world.
If you’re a stock market investor you might be feeling pretty good about how your portfolio of U.S. equities fared in the first year of President Trump’s term.
All the major market indices seemed to be firing on all cylinders, with the Standard & Poor’s 500 index gaining 17.9% through the full year.
But if you’re the type of investor who looks for things to regret, pay no attention to the rest of the world’s stock markets. That’s because overseas markets did better than the U.S. market in 2025 — a lot better. The MSCI World ex-USA index — that is, all the stock markets except the U.S. — gained more than 32% last year, nearly double the percentage gains of U.S. markets.
That’s a major departure from recent trends. Since 2013, the MSCI US index had bested the non-U.S. index every year except 2017 and 2022, sometimes by a wide margin — in 2024, for instance, the U.S. index gained 24.6%, while non-U.S. markets gained only 4.7%.
The Trump trade is dead. Long live the anti-Trump trade.
— Katie Martin, Financial Times
Broken down into individual country markets (also by MSCI indices), in 2025 the U.S. ranked 21st out of 23 developed markets, with only New Zealand and Denmark doing worse. Leading the pack were Austria and Spain, with 86% gains, but superior records were turned in by Finland, Ireland and Hong Kong, with gains of 50% or more; and the Netherlands, Norway, Britain and Japan, with gains of 40% or more.
Investment analysts cite several factors to explain this trend. Judging by traditional metrics such as price/earnings multiples, the U.S. markets have been much more expensive than those in the rest of the world. Indeed, they’re historically expensive. The Standard & Poor’s 500 index traded in 2025 at about 23 times expected corporate earnings; the historical average is 18 times earnings.
Investment managers also have become nervous about the concentration of market gains within the U.S. technology sector, especially in companies associated with artificial intelligence R&D. Fears that AI is an investment bubble that could take down the S&P’s highest fliers have investors looking elsewhere for returns.
But one factor recurs in almost all the market analyses tracking relative performance by U.S. and non-U.S. markets: Donald Trump.
Investors started 2025 with optimism about Trump’s influence on trading opportunities, given his apparent commitment to deregulation and his braggadocio about America’s dominant position in the world and his determination to preserve, even increase it.
That hasn’t been the case for months.
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”The Trump trade is dead. Long live the anti-Trump trade,” Katie Martin of the Financial Times wrote this week. “Wherever you look in financial markets, you see signs that global investors are going out of their way to avoid Donald Trump’s America.”
Two Trump policy initiatives are commonly cited by wary investment experts. One, of course, is Trump’s on-and-off tariffs, which have left investors with little ability to assess international trade flows. The Supreme Court’s invalidation of most Trump tariffs and the bellicosity of his response, which included the immediate imposition of new 10% tariffs across the board and the threat to increase them to 15%, have done nothing to settle investors’ nerves.
Then there’s Trump’s driving down the value of the dollar through his agitation for lower interest rates, among other policies. For overseas investors, a weaker dollar makes U.S. assets more expensive relative to the outside world.
It would be one thing if trade flows and the dollar’s value reflected economic conditions that investors could themselves parse in creating a picture of investment opportunities. That’s not the case just now. “The current uncertainty is entirely man-made (largely by one orange-hued man in particular) but could well continue at least until the US mid-term elections in November,” Sam Burns of Mill Street Research wrote on Dec. 29.
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Trump hasn’t been shy about trumpeting U.S. stock market gains as emblems of his policy wisdom. “The stock market has set 53 all-time record highs since the election,” he said in his State of the Union address Tuesday. “Think of that, one year, boosting pensions, 401(k)s and retirement accounts for the millions and the millions of Americans.”
Trump asserted: “Since I took office, the typical 401(k) balance is up by at least $30,000. That’s a lot of money. ... Because the stock market has done so well, setting all those records, your 401(k)s are way up.”
Trump’s figure doesn’t conform to findings by retirement professionals such as the 401(k) overseers at Bank of America. They reported that the average account balance grew by only about $13,000 in 2025. I asked the White House for the source of Trump’s claim, but haven’t heard back.
Interpreting stock market returns as snapshots of the economy is a mug’s game. Despite that, at her recent appearance before a House committee, Atty. Gen. Pam Bondi tried to deflect questions about her handling of the Jeffrey Epstein records by crowing about it.
“The Dow is over 50,000 right now, she declared. “Americans’ 401(k)s and retirement savings are booming. That’s what we should be talking about.”
I predicted that the administration would use the Dow industrial average’s break above 50,000 to assert that “the overall economy is firing on all cylinders, thanks to his policies.” The Dow reached that mark on Feb. 6. But Feb. 11, the day of Bondi’s testimony, was the last day the index closed above 50,000. On Thursday, it closed at 49,499.50, or about 1.4% below its Feb. 10 peak close of 50,188.14.
To use a metric suggested by economist Justin Wolfers of the University of Michigan, if you invested $48,488 in the Dow on the day Trump took office last year, when the Dow closed at 48,448 points, you would have had $50,000 on Feb. 6. That’s a gain of about 3.2%. But if you had invested the same amount in the global stock market not including the U.S. (based on the MSCI World ex-USA index), on that same day you would have had nearly $60,000. That’s a gain of nearly 24%.
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Broader market indices tell essentially the same story. From Jan. 17, 2025, the last day before Trump’s inauguration, through Thursday’s close, the MSCI US stock index gained a cumulative 16.3%. But the world index minus the U.S. gained nearly 42%.
The gulf between U.S. and non-U.S. performance has continued into the current year. The S&P 500 has gained about 0.74% this year through Wednesday, while the MSCI World ex-USA index has gained about 8.9%. That’s “the best start for a calendar year for global stocks relative to the S&P 500 going back to at least 1996,” Morningstar reports.
It wouldn’t be unusual for the discrepancy between the U.S. and global markets to shrink or even reverse itself over the course of this year.
That’s what happened in 2017, when overseas markets as tracked by MSCI beat the U.S. by more than three percentage points, and 2022, when global markets lost money but U.S. markets underperformed the rest of the world by more than five percentage points.
Economic conditions change, and often the stock markets march to their own drummers. The one thing less likely to change is that Trump is set to remain president until Jan. 20, 2029. Make your investment bets accordingly.
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Ideas expressed in the piece
The U.S. stock market’s 17.9% gain in 2025 significantly lagged foreign markets, which gained more than 32%, representing a dramatic reversal of the historical trend where U.S. markets dominated since 2013[3]. The U.S. ranked only 21st out of 23 developed markets, with countries like Austria and Spain posting 86% gains while Hong Kong, Ireland, and Finland exceeded 50% gains[3].
U.S. markets have become historically overvalued relative to global counterparts, trading at 23 times expected corporate earnings compared to the historical average of 18 times earnings, making them significantly more expensive than overseas markets on traditional metrics[3]. Investment managers have grown increasingly nervous about the concentration of U.S. gains within the technology sector and companies associated with artificial intelligence research and development, with concerns that AI represents an investment bubble that could undermine the market’s strongest performers[3].
Trump administration policies have fundamentally shifted investor sentiment away from U.S. assets and toward international alternatives. The unpredictable tariff environment, the Supreme Court’s invalidation of most Trump tariffs followed by the immediate imposition of new across-the-board tariffs and threats of further increases, have prevented investors from accurately assessing international trade flows[3]. Additionally, the administration’s efforts to drive down the dollar’s value have made U.S. assets more expensive for overseas investors, further discouraging foreign capital flows[3].
The Trump administration’s claims about economic performance, particularly regarding retirement account gains, have been exaggerated. While the president asserted that the typical 401(k) balance increased by at least $30,000, retirement professionals at Bank of America reported actual average account balance growth of only approximately $13,000 in 2025[3]. Stock market gains serve as poor indicators of broader economic health and should not be used as the primary metric for assessing policy success[3].
Different views on the topic
The S&P 500’s 17.9% return in 2025 represented the third consecutive year of double-digit gains, driven primarily by earnings growth rather than valuation expansion, with profit growth increasingly broadening beyond the most dominant technology stocks[4]. Seven sectors delivered double-digit gains in 2025, with five sectors rising 80 percent or more since the bull market began in October 2022, demonstrating strength across the broader market rather than narrow concentration[1].
Strong economic fundamentals supported stock market performance throughout 2025 despite significant policy uncertainty. The U.S. economy delivered well above-average GDP growth in the second and third quarters, with real GDP rising 4.3% in the third quarter, and the Federal Reserve cut interest rates by 75 basis points across its final three meetings of 2025[1][5]. Consumer spending, particularly among upper-income households, remained robust, and an unanticipated surge in artificial intelligence capital spending provided additional economic stimulus[1].
Market recovery following tariff-induced volatility demonstrated investor confidence in the economy’s underlying strength and companies’ ability to maintain profitability. After the S&P 500 declined nearly 20% in seven weeks following the April 2025 tariff announcements, the index surged nearly 40 percent from its April 8 low through year end as tariff rates were subsequently lowered through trade deals and a temporary truce with China[2]. This recovery was not driven by headline improvements alone but reflected investor confidence that businesses could adjust to policy changes and preserve profits[2].
Stock market performance during Trump’s first year compared favorably to historical precedent. Since the 2024 election through February 23, 2026, the S&P 500’s total return climbed 20.3% despite significant volatility, and Trump’s first term from 2017-2020 saw an 81.4% total return, ranking fourth for investor returns over a four-year presidential term since 1980[2]. The continuation of three straight years of double-digit gains for all three major indexes represents an impressive achievement even while the first year of the second administration lagged gains from 2023 and 2024[4].
