Does the Trump Economy Mean Investors Should Look To Invest Overseas?

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To say that the global economy has been tumultuous under the first few months of President Donald Trump’s second term would be an understatement. The volatile mix of changing tariff policies, high interest rates and geopolitical turmoil has spiked volatility in the domestic and global markets, leaving many investors uncertain where to turn. 

With so much uncertainty still in the air — and with the S&P 500 index coming off back-to-back years of 20%-plus gains — some investors have begun looking overseas. But is that a good strategy, for either short-term or long-term investors? Here’s an overview of where things stand and what you should consider when making that decision for yourself.

2025 Performance Comparison

Thus far in 2025, investors are clearly speaking with their money — and international stocks have been the way to go. While the S&P 500 has only mustered a modest 5.73% year-to-date gain as of June 30, the MSCI World ex USA Index, the international proxy for the S&P 500, has posted a solid 19.5% return. 

Over the past year, which includes the final six months of 2024, the S&P 500 did better but still lagged the international index by a 19.3% to 13.33% margin. This indicates that the shift to international equities has occurred almost entirely since Trump has taken office. 

Domestic vs. International Investing With a Longer Lens

Over a short time frame, nearly any asset class could potentially outperform another. Although a tactical allocation to international stocks may make sense in the current environment for some investors, is it merely a diversification tool in the midst of uncertainty? Or does it make sense for long-term investors as well?

Looking at the performance of international stocks over the long run, you can see they generally tend to underperform U.S. markets.

Take a look at the data from Dec. 31, 1998, through May 30, 2025, for example. Over that time period, the MSCI World Index ex USA rose from 3,150.46 to 13,393.56, meaning an investment would have more than quadrupled. But the MSCI World Index — which also includes the U.S. — rose from 2,977.02 to 18,250.36, meaning your money would have grown in value by roughly a factor of six. 

This isn’t to say that you should never invest in international stocks. Many advisors recommend a moderate allocation to foreign equities regardless of the current state of the U.S. market for diversification purposes.

And international equities have outperformed U.S. markets in the past, and can again. In recent history, for example, markets outside of the U.S. trounced domestic returns for a full decade, from 2001 through 2010.

Differing Characteristics of Foreign and Domestic Stocks

At the end of the day, what’s most important is to match your own personal financial objectives and risk tolerance with the appropriate investments.

By and large, foreign stocks tend to be more value-oriented, with lower valuations and higher dividend payments. The bulk of U.S. stock market gains in recent history, on the other hand, have been generated by richly priced tech giants. Thus, your own investment style might dictate which markets you would gravitate to.  

For some investors, a nice blend of international and U.S. stocks might be the ticket. As foreign and domestic markets don’t always move in the same direction, the overall effect of a blended portfolio could be a reduction in volatility.

With fewer big swings in your portfolio value, you might be more likely to stick with your asset allocation and avoid making emotional decisions — like buying high and selling low. This alone could potentially improve the long-term performance of your overall portfolio.

Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.

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