Market Factors: American Unexceptionalism

Perhaps shredding the rulebook that has governed global trade since the Second World War was a bit hasty, after all. This is investment reporter Tim Shufelt filling in for Scott Barlow, and today we’re focusing on what investors think of the blitzkrieg of trade warfare Donald Trump has levelled against allies and adversaries alike. We’ll also look at what has worked for fund investors over the last 20 years. Plus, have we, as a society, considered how boring it must be to be a vampire?

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U.S. STOCKS

Trump’s brand of chaos has Wall Street on edge

When Donald Trump reclaimed the U.S. presidency three months ago, the consensus view was that Trump 2.0 would probably be good for the U.S. stock market. Taxes would fall, regulations would be cut, the fat cats in corporate America would be treated very well, and the market’s animal spirits would be unleashed.

But then Trump brought a whirlwind of chaos from Day One, moving quickly to neutralize the federal bureaucracy, undermine the authority of U.S. Congress over federal spending, dismantle the global rules-based system of trade, and generally stupefy the entire world with wild threats and power grabs.

The last month has been a lot for everyone to process, the corporate sector and the stock market included.

Crushing tariffs proposed against continental neighbours have reignited inflationary fears and befuddled American executives.

JP Morgan, the country’s largest bank, wondered if Trump’s policy mix might be “business unfriendly” – fighting words by Wall Street standards.

Ford Motor Co. CEO James Farley said tariffs are creating “cost and chaos” that could devastate the North American auto industry.

Billionaire hedge fund investor Ken Griffin, who also happens to be one of the Republican Party’s biggest donors, said the President’s rhetoric toward America’s closest allies is an “impediment to growth.”

Meanwhile, the rally in U.S. stocks has wobbled. Earnings are still strong, that’s not the problem. In fact, S&P 500 profits are trouncing forecasts and on track to rise by around 12 per cent, year over year.

But investors have been indifferent to a stellar earnings season. Stocks beating estimates have trailed the S&P 500 by an average of 0.1 per cent on the day of reporting earnings, according to Bloomberg Intelligence.

Since American voters made their controversial choice, the S&P 500 index is up by around 6 per cent – not at all exceptional, compared to the run in European and Chinese stocks over that time.

Let’s look a little more closely at how some non-U.S. markets have fared.

Europe

European stocks have stormed out of the gate in 2025, rising by around 11 per cent in the first six weeks of the year. This fact may strike readers as strange, for two reasons.

First, European stocks have stunk for a very long time. In the 10 years up to the end of 2024, the MSCI European Index returned an average of 2.2 per cent annually. That compares extremely unfavourably to the S&P 500, which generated an average annual return of 11.1 per cent over that time.

And second, Europe has a lot of problems. Slow growth. Lots of internal trade barriers. Political turmoil. And now the pall of Trump’s tariffs. Sound familiar?

But financially and economically, some stars are aligning. European stocks are very cheap after spending years in the wilderness. A weakened euro helps. As do continuing rate cuts.

There is also a movement underway to remove Europe’s own impediments to free trade, which former European Central Bank president Mario Draghi said are causing far more economic harm than U.S. tariffs would.

China

The Chinese government is trying to revive an economy wounded by the pandemic, an antitrust crackdown on the tech sector and a real estate crisis.

But investor sentiment seems to be improving. Year to date, the Hang Seng Index is up by 14 per cent.

Two big forces are at work here. A sweeping stimulus package announced by the Chinese government in September. And DeepSeek, a low-budget artificial intelligence app that shook up the global tech scene when it was released last month.

“DeepSeek may be stimulating an AI frenzy in China now too,” investment strategist Ed Yardeni wrote in a note to clients.

Canada

We are painfully aware of Canada’s economic shortcomings now that Trump has decided to exploit them for his benefit. But the TSX has held up relatively well even in the face of a trade war that could be devastating for the domestic economy.

Since the U.S. election, the S&P/TSX Composite Index has more or less kept pace with U.S. stocks. Ours being a globally oriented stock market, most of the TSX’s earnings power is not highly exposed to tariffs.

Now let’s see if policy makers can seize the moment and make progress on the reforms needed to spark domestic growth.

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INVESTMENT FUNDS

Why you should bet on low fees

Up until the 1700s, the life expectancy of Britain’s wealthiest people was much shorter than the general population, Morgan Housel, author of The Psychology of Money, once wrote.

“The best explanation is that the rich were the only ones who could afford all the quack medicines and sham doctors who peddled hope but increased your odds of being poisoned.”

Housel speculated further. “I would bet good money the same happens today with investing advice.”

In other words, those of means tend to avail themselves of exotic investments that fail to outperform, largely because of their hefty fees. Like hedge funds.

Jeffrey Ptak at Morningstar recently pored through 20 years of U.S. fund data to see how well fees predicted performance.

He grouped the population of equity and bond funds by their expense ratios, from cheapest to most expensive.

Not only did low fees translate to better returns. But the cheapest funds outperformed the priciest funds, on average, in every single year that spanned the study, he wrote.

“Investors choosing funds should start with fees, favouring those that levy lower expense ratios than peers.”

Diversions

The vampires of Silicon Valley

The obsession with anti-aging has reached horrifying proportions. Tech entrepreneur Bryan Johnson is the subject of a new Netflix documentary chronicling his campaign to live forever by spending millions on experimental treatments. Apparently, he has moved on from injecting his son’s blood to something called “total plasma exchange.” Johnson announced this on X while holding a bag of bright yellow plasma. Nightmare fuel.

Immortality is probably not all it’s cracked up to be. The boredom alone.

Marcus Aurelius said it best. “Death smiles on us all. All a man can do is smile back.” At least, that’s how Russell Crowe delivered the line in Gladiator.

The essentials

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The Rundown

America’s tech behemoths have driven the S&P to new heights over the past few years. But don’t ignore Canada’s tech players, warns Gordon Pape. Firms like Celestica and Constellation Software tend to fly under the radar but have been offering strong earnings in recent months.

Where’s the best place globally to invest? Frederick Vettese weighs the options.

Trying to invest based on U.S. President Donald Trump’s next move is a fool’s game, writes Colin White of the Verecan Group. Now’s the time for longterm planning-along with a few smart moves that allow you to stay patient amid instability.

What’s up next

Thursday will offer insight into Canada’s economic strength with the release of the new housing price index for January as well as the industrial product and raw materials price indexes.

Bank of Canada Governor Tiff Macklem will address a joint meeting of the Mississauga Board of Trade and Oakville Chamber of Commerce on Friday. The topic is “Trade friction, structural change and monetary policy.”

Earnings expected in the next few days include Altus Group Ltd., Boardwalk REIT; Cameco Corp., Eldorado Gold Corp., Hydro One Ltd., Iamgold Corp., Loblaw Companies Ltd., Lundin Gold Inc., Newmont Goldcorp Corp., Quebecor Inc., Teck Resources Ltd.; TransAlta Corp., and Walmart Inc.