The S&P 500 is finally catching up to international markets after getting outperformed in the first half of 2025.
While investors with diversified portfolios have been leaning on non-US assets for returns, July is flipping the script. The US index is now outpacing major global ETFs that had previously taken the lead, including those tied to Europe, emerging markets, and ex-US world stocks.
This reversal comes even as trade tensions are ramping up again under President Donald Trump. During a call with Kristen Welker of NBC’s “Meet the Press,” Trump pointed to Wall Street’s record levels as proof the tariffs are being “very well-received.” For US investors locked into the S&P 500, that confidence seems justified… at least for now.
White House targets Brazil and Canada as ETFs slide
US markets may be up, but foreign assets are under pressure. The iShares MSCI Brazil ETF (EWZ), which had been outperforming the S&P 500 earlier this year, is now down 4.6% just in July.
That drop came after Trump slapped a brutal 50% tariff on Brazilian imports this week. The iShares MSCI Canada ETF (EWC) is also falling behind, following a similar pattern. Both countries are now facing direct trade retaliation from Washington, and the market is reacting fast.
Ulrike Hoffmann-Burchardi, Chief Investment Officer for the Americas and Global Head of Equities at UBS Global Wealth Management, said in a note that Trump appears “emboldened to escalate trade actions” after winning some recent policy fights.
Ulrike noted that many of the most heavily weighted stocks in the S&P 500 are largely safe from these tariff shocks. “We think the index can climb to 6,500 by June next year despite periodic volatility,” she wrote. That would represent about a 4% rise from where the index stood last Friday.
The insulation Ulrike is talking about comes from the S&P 500’s heavy exposure to tech and other sectors that aren’t directly tied to the flow of physical goods.
That makes it harder for tariffs to dent the value of many big US companies. It also gives domestic stocks a cushion that international funds just don’t have right now.
US recovers dominance as global bets lose steam
During the first half of 2025, foreign markets had the upper hand—a rare situation, given the last decade of US-led performance. But by July, that dynamic has started to swing back.
Vanguard’s global ETFs excluding the US are now trailing the S&P 500, wiping out earlier gains. Investors who went all-in on diversification at the start of the year are now watching US stocks pull ahead again.
Peter Oppenheimer, Chief Global Equity Strategist at Goldman Sachs International, said US equities are still pricey. “Valuation spreads between the US and the rest of the world are at historical highs,” Peter wrote in a client memo.
Even with that, he admitted that the US has reclaimed its footing faster than expected. “After a decade of US-led dominance, the case for diversification is back,” he said, but current numbers are proving otherwise.
The S&P 500’s comeback puts pressure on global funds that were supposed to be the safe bet in a volatile election year. But that safety looks weaker now that Brazil and Canada are taking direct hits. Trump’s new tariffs are doing more damage abroad than at home, at least in the short term.
Investors with broader exposure might feel the squeeze more than those who stuck with the core US index. And with Ulrike forecasting a 6,500 level by next summer, that bet on the S&P 500 is starting to look more appealing again, even if it comes with occasional swings.
Right now, the American stock market is running hot, tariffs or not. And unless something drastic changes, July could be the point where the US fully reclaims its lead from the rest of the world.
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