The Trump administration's moves to ratchet up trade tensions has done little to knock U.S. stocks off their recent highs, but investors with broader portfolios might suddenly be feeling pinched. Ulrike Hoffmann-Burchardi, chief investment officer for the Americas and global head of equities at UBS Global Wealth Management, said in a note to clients that Trump appears "emboldened to escalate trade actions" after some recent policy wins. The strength of the stock market may be emboldening the White House in its trade talks. Trump, in a phone call with NBC News' "Meet the Press" moderator Kristen Welker, said the record stock market highs were evidence that tariffs have been " very well-received ." Domestic stocks that are rising despite tariff concerns may simply reflect that goods-based tariffs aren't necessarily a major negative to the tech-heavy U.S. stock market. "Many of the most heavily weighted U.S. equities in the S & P 500 are fairly insulated from tariff risk, in our view, and we think the index can climb to 6,500 by June next year despite periodic volatility," Hoffmann-Burchardi said. That's about 4% above where the index was trading Friday. Of course, many investors hold more than just large cap domestic stocks. One key trend to watch may be whether foreign markets show the same resilience as U.S. stocks recently have. In the first half of the year, global stocks outperformed the U.S. — an unusual reversal of long-term American dominance. But there are some signs that may be starting to flip back now in the direction of the U.S. Major Vanguard ETFs tracking Europe, emerging markets and world markets excluding the U.S. are all underperforming the S & P 500 in July after outperforming through the first half. And some country-specific funds whose nations are are in the crosshairs of new White House tariffs are doing even worse. The iShares MSCI Brazil ETF (EWZ) is still outperforming the U.S. in 2025, but is down 4.6% in July after Trump slapped 50% levies on the South American country this week. The iShares MSCI Canada ETF (EWC) is also trailing this month. EWZ YTD mountain This Brazil fund has struggled in July after a strong first half. If this latest reversal against international and in favor of domestic doesn't hold, valuations may be one reason. Peter Oppenheimer, chief global equity strategist of Goldman Sachs International, said in a note to clients that U.S. stocks still look expensive compared to rest of the world, even with the first half underperformance. "After a decade of U.S.-led dominance, the case for diversification is back. Valuation spreads between the U.S. and the rest of the world are at historical highs," Oppenheimer said. — CNBC's Michael Bloom contributed reporting.
