Let's talk about Trump's market falling behind the rest of the world.... - Belle of the Ranch

[TexasTowelie]

Well, howdy there Internet people. It's Belle again. So, today we're going to talk about Trump's market falling behind the rest of the world.

Before we get started, just a reminder that down below there will be a link for the fundraising effort to benefit Project Rebound at California State University Northridge. It's a program that has produced incredibly great results over the years and we've been supporting them for a while. Check it out and help formerly incarcerated people move forward because with Trumpian cuts and freezes, stuff like this is going to become even more important.

What's up? Back on the 27th, news broke that UBS had downgraded the US stock market, which surprised Americans who had been buying into the Trumpian line that the market was hot and that nobody in the world had seen anything like this or whatever other nonsense he's been spouting about the economic state. Reminder, the stock market is not the economy, but comparatively even the stock market isn't doing great.

So, here's a question. On the other channel, you mentioned that the US stock market had been downgraded by UBS. I kind of expected a follow-up explaining why in more detail, but I know a war broke out. I'm just wondering if we'll ever get a deeper explanation?

First, let's do a quick comparison of the performance of some world markets so far this year. All of these numbers are from the beginning of the year until the 27th, which is when the news broke and before Trump started a war that shook the markets.

The Nikkei, that's Japan, has gone up 13½%. The FTSE 100, that's London, is up more than 9½%. The Shanghai Composite is up 3.47% and the TSX Composite, Canada, is up 7.71%. The stocks Europe 600 is up more than 6%. What about the Dow? The Dow only went up a meager 1.23%. Okay, so there's a bunch of reasons UBS could have made this call beyond Trump killed growth, but four stand out to me.

First, the dollar. The US dollar could weaken more relative to other major currencies. That matters more than people think. When the dollar falls, international investors often see smaller returns on US stocks once everything is factored in. At the same time, a weaker dollar can make foreign markets look more attractive. If UBS expects the euro and other currencies to strengthen, that shifts the relative appeal away from US equities.

Second, valuations. As we've covered extensively, US stocks are overvalued. In plain terms, investors are paying more for each dollar of earnings in the US than they are elsewhere. If earnings slow or growth disappoints, expensive markets can correct more sharply. That's a nice way of saying crash.

Third, buybacks. For years, US companies have supported elevated stock prices through aggressive share repurchases. Buybacks reduce the number of shares outstanding, which boosts earnings per share and often supports prices. Buyback yields are now closer to global averages, meaning US stocks no longer have that same structural advantage.

Fourth is policy uncertainty. Markets hate uncertainty. Trump's tariffs and erratic economic behavior is holding the US economy and the stock market back. Is this devastating in and of itself? Not really. It's just another sign that the US economy isn't doing as well as some might want to believe. The talking points are at odds with reality. Call it the Trump effect.

Anyway, it's just a thought. Y'all have a good day.