‘America First’ in last month’s equity performance

Last week, we discussed the rise in the 10-year US government bond yield and the US dollar due to Trump’s election win. Since then, the 10-year yield has continued its upward path, reaching 4.45%, while EUR/USD approached 1.05. Trump’s second term also guided American equity markets significantly higher. The prospects of lower corporate tax rates and an "America First" business climate have led investors to expect higher profitability from US companies. Meanwhile, the outlook for equities outside the US soured amid looming tariffs and concerns about a potential trade war. The difference resulted in US equities outperforming global equities (excluding US equities) by more than 8% over the past month. This astonishing monthly outperformance of US equities was the second-largest in the last two decades. It is interesting to note that, on average, US equities realized a monthly outperformance of 0.39% versus global equities over the same period.