US stocks are more expensive than ever after Trump's tariffs
We don’t need to second-guess the effect of Trump's tariffs to think that the rest of the world offers better value


When Donald Trump began unveiling his tariff plans in April, investors feared we were entering a sharp and sudden bear market. Stocks dropped sharply around the world, with the US down 10% in two days. Yet the plunge was short-lived: stocks rallied as abruptly as they had dropped. The US and other major global markets have gone on to new highs. So did investors get rattled too easily – or are they too sanguine now?
On the optimistic side, the deals that the US is striking with trading partners look less damaging than everybody feared in April. Yes, tariffs are unwelcome. They bring complexity and friction to global trade and add costs. Those costs will be borne to varying extents by the entire supply chain between foreign exporters and US consumers. Yet these deals still reduce the risks of a wider and more damaging trade war.
The pessimistic take is that America’s views on the rest of the world have changed. It is backing away from principles that it has championed for decades to become insular and mercantilist. Policymaking is more arbitrary and unpredictable. We can’t even be confident that these deals – which are still broad frameworks – will be honoured, let alone what might come in the next three-and-a-half years and beyond.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
US stocks vs the world
So the rest of the world is reacting in a rational way. Countries are striking deals with the US to minimise immediate disruption, but over the longer term they will have to recognise that the world is changing. Trade patterns and alliances will shift. CEOs are also trying to flatter Trump by announcing large investments in the US to avoid being targeted – we are seeing plenty of this from pharma firms in an effort to ward off threats of high tariffs on imported drugs. Yet it remains to be seen how much will be puffing up investment that was already in the pipeline and how much actually materialises.
We will be looking at how all this could play out at Turmoil, Tariffs and Trump 2.0, our next annual MoneyWeek Wealth Summit on 7 November (tickets have just gone on sale at moneyweekwealthsummit.co.uk/2025). However, in stock market terms, there is one obvious idea for managing these risks.
US stocks have so far outstripped the rest of the world over the past 15 years that they now make up 60%-70% of the global market, depending on which index you track. This has been driven by superior earnings growth, but valuations have also diverged much more than many investors realise.
The MSCI USA trades on 23 times forecast earnings, while the MSCI Europe is on 14. Look back to mid 2016 – about the time the divergence accelerated – and the MSCI USA was on 17 times forward earnings, while the MSCI Europe was on 15 times. So striking a better balance between the US and the rest of the world than a typical global tracker fund doesn’t need to be a bet on whether Trump’s policies will ultimately hurt the US. Doing so is increasingly justified by the growing gulf in valuations.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.
Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.
He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.
-
Rail fares could spike by 5.8% next year – how to save on train travel
July’s RPI inflation reading tends to determine rail fare hikes in the following year. We look at how much your train tickets could cost, and how to save money
-
'Governments are launching an assault on the independence of central banks'
Opinion Say goodbye to the era of central bank orthodoxy and hello to the new era of central bank dependency, says Jeremy McKeown
-
Why investors can no longer trust traditional statistical indicators
Opinion The statistical indicators and data investors have relied on for decades are no longer fit for purpose. It's time to move on, says Helen Thomas
-
Investors rediscover the virtue of value investing over growth
Growth investing, betting on rapidly expanding companies, has proved successful since 2008. But now the other main investment style seems to be coming back into fashion.
-
8 of the best properties for sale with shooting estates
The best properties for sale with shooting estates – from an estate in a designated Dark Sky area in Ayrshire, Scotland, to a hunting estate in Tuscany with a wild boar, mouflon, deer and hare shoot
-
The most likely outcome of the AI boom is a big fall
Opinion Like the dotcom boom of the late 1990s, AI is not paying off – despite huge investments being made in the hope of creating AI-based wealth
-
What we can learn from Britain’s "Dashing Dozen" stocks
Stocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?
-
The rise of Robin Zeng: China’s billionaire battery king
Robin Zeng, a pioneer in EV batteries, is vying with Li Ka-shing for the title of Hong Kong’s richest person. He is typical of a new kind of tycoon in China
-
Europe’s forgotten equities offer value, growth and strong cash flows
Opinion Jonathon Regis, co-portfolio manager, Developed Markets UCITS Strategy, Lansdowne Partners, highlights forgotten equities he'd put his money in
-
How retail investors can gain exposure to Lloyd’s of London
It’s hard for retail investors to get in on the action at Lloyd’s of London. Here are some of the ways to gain exposure