Outlook So far in 2025, the broad market index for U.S. stocks, S&P 500, has returned a solid +10.7%.1 One of the main global indexes for non-U.S. stocks is called the MSCI All Country World Index ex-USA (MSCI ex-U.S.). It has turned in an even more impressive year-to-date return of 22.0%.2 Much of this relative performance has been attributed to the relative decline of the U.S. Dollar against other currencies - effectively a weakening exchange rate.
In our view, there are a few primary reasons why non-U.S. Markets, broadly speaking, may continue to do relatively well. Firstly, the U.S. faces certain economic risks to growth. Both immigration and tariff policies may lead to price hikes for hiring and goods. Increased prices in these instances would be more related to a constraint in the supply of labor and goods vs. a pick-up in demand. Supply-constrained inflation is generally trickier to solve. That said, this is more of a risk and far from certainty. Beyond these economic factors, fundamental metrics of non-U.S. stocks seem relatively compelling. The ACWI ex-U.S. index has a much lower price-to-earnings multiple compared to the S&P 500 (15x vs 23x) while projected earnings growth is less than that of the S&P 500, but not by much (8.6% vs. 9.8%).1,2
All considered, we believe the U.S. economy remains on solid footing given the strength of the consumer, businesses, and the banking system. However, despite relatively weak performance of non-U.S. markets over the past couple of decades, it may be worth considering some exposure to global equities as part of a long-term strategic allocation.
. . . The U.S. equity markets notched a small loss for the week, after posting record highs intra-week for the S&P 500. The slight pullback was driven by a decline in semiconductor stocks after disappointing guidance, although partially offset by favorable economic data. For the week, the S&P 500 dipped -0.1%, while the blue-chip Dow Jones and tech-heavy Nasdaq fell -0.2%. The week was filled with updates from key readings on growth and inflation. The second estimate of U.S. Q2 gross domestic product (GDP)showed an upward revision to the annual growth rate of 3.3% from 3.0%. Q2 growth showed exceptional strength and resilience in the economy, driven by continued consumer spending and a turnaround in trade balance. The revised increase in real GDP is largely due to an increase in investment and consumer spending, partially offset by a decline in government spending and an increase in imports. The real GDP reading showed consumer spending rose 1.4%, better than the 0.5% seen in the prior period. While imports, which are subtracted in the GDP calculation, declined by 30.3%, reversing the 37.9% surge seen in Q1.3 Meanwhile, later in the week, thepersonal consumption expenditures (PCE), commonly referred to as the Federal Reserve’s preferred measure of inflation, was released, indicating that pricing pressure is retreating, but some tariff impacts may be working their way through the economy. The PCE price index showed the annual inflation rate held steady at 2.6% and the monthly rate increased by 0.2%, both in line with expectations. Whereas, the core rate, which the Fed considers to be a better indicator of longer-run trends as it excludes the volatile categories of food and energy, increased to a 2.9% seasonally adjusted annual rate. Marking a 0.1% increase from the June level and the highest rate since February, although in line with forecasts.4 The central bank targets an annual inflation rate of 2.0%, so this report shows prices are running a bit higher than that. Nonetheless, markets are still expecting the Fed to resume lowering its benchmark interest rate (the federal funds rate) at the upcoming September meeting, particularly after inflation came in line with expectations.5 However, the nonfarm payrolls report coming out this Friday, September 5th, will have a large impact on policymakers’ decision for interest rates, as much of the focus has shifted from rising inflation to potential emerging weaknesses in the labor market. | 
