S&P 500 Roars Back—Closing Gap on Global Rivals After Rocky 2025 Start

Wall Street's benchmark shakes off early-year turbulence—now nipping at the heels of international competitors.

The Comeback Kid: Six months after a bruising Q1, the S&P 500 defies doomsayers with relentless upward momentum.

Global Game of Catch-Up: While European and Asian indices stalled, America's financial engine proves it still owns the playbook—for now.

Cynical Trader's Note: Just in time for another round of 'this time it's different' analyst reports.

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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