TOP STORY
🇺🇸 Amid Tariff Turmoil, Should You Diversify Away From The US?

🎢 It was another wild week in the markets, with Trump’s announcement of a 90-day pause on tariffs sending stocks soaring, recovering some of the brutal losses we saw last week.

• The S&P 500 ended the week up 8.3% - its biggest weekly gain since 2023 (but still down -12.7% from all-time-highs)

• The Nasdaq-100 ended the week up 11.4% - its biggest weekly gain since 2022 (but still down -15.7% from all-time-highs)

💡 In fact, Wednesday’s jump was so big it was the S&P 500’s best day since 2008 (a good reminder that panic-selling isn’t a good idea 😅)

🤷‍♂️ Even so, the markets are farrrrrrrr from back to normal. Uncertainty is at an all-time high, and the markets are at the whim of the next tariff announcement.

👀 Throughout the wild market turmoil we’ve been experiencing, it’s possible you’ve come across this chart:

⭐️ This chart has a great message - despite all the reasons to fear in the past 20 years, over the long term, the S&P 500 (an index tracking the top 500 companies in the US) has steadily climbed (to the tune of ~10% per year).

🤔 But according to some, this time might be a little different - the US might be losing its dominance. So let’s talk about what’s happening, whether you should consider diversifying away from the US, and what are some of the best ways to do so…

🦅 Is the US Losing Its Dominance?

Ok - the claim that the US is losing its dominance is a big one, so what’s the proof?

😰 Sell-off in the Bond Market

One data point is the US bond market. For a quick refresher, a bond is essentially a loan from investors to the government, which pays a steady interest rate.

Bonds are seen as a safe-haven asset, with demand (and therefore price) generally increasing when the rest of the market falls. But instead, both US stocks and bonds are seeing sell-offs, with the 10-year Treasury yield jumping 12%, increasing the cost of borrowing for the US government.

As one economist puts it:

💵 A Falling US Dollar

The other evidence is in the US dollar, which has slumped more than 3% against global currencies - its biggest drop since 2022, bringing it to the lowest level since September.

Now, one challenge with making sense of all this is understanding how much is the politics talking.

Trump’s Treasury Secretary Scott Bessent has pushed back against these claims, saying the falling demand for bonds is due to a ‘normal deleveraging’.

Regardless of where you fall politically, I think this is a good opportunity to talk about over-exposure to the US markets more generally and what you can do about it - (something I actually made a video about back in October, before Trump was even elected!)

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TOP STORY CONT.
📊 Should You Diversify Away From the US? And If So, How?

🐣 One of the most common pieces of advice for beginner investors is ‘just buy and hold the S&P 500’ - but if you’re doing that, you’re making a conscious choice to only buy US companies.

🏆 Over the past 5 years, that’s been a winning strategy - with the S&P 500 ETFs like $ZSP or $VFV returning +83% compared to only +63% for more globally diversified ETFs like $XEQT. This has led both advisors and retail investors alike to potentially over-index on US stocks and ETFs.

💡And the risk of the US losing its dominance isn’t the only reason to consider greater geographic diversification. Here are 3 more reasons:

1) 🤑 Non-US Stocks Are Trading at a Discount

• Even with the recent market drop, the US is still trading at a P/E Ratio of ~24x, much higher than the rest of the world (check out this random website I found for some pretty cool geographic comparisons).

• P/E is a popular measure to compare how expensive a stock (or in this case a market) is, as it measures how much you’re paying for a stock as a multiple of the company’s earnings - based on this, the rest of the world is trading at a discount

  

   

2) 🤖 The S&P is Heavily Weighted into Mag-7

• The Top 10 stocks in the S&P 500 make up over 35% of the index, the highest level in the past 30 years, meaning the S&P 500 is less diversified than it has been historically.

• These stocks are primarily tech, with the popular Mag-7 (Nvidia, Alphabet, Amazon, Microsoft, Tesla, Meta, and Apple) making up a massive 30% of the index.

3) 💸 Excluding Currency Fluctuations, the International Index has Actually Outperformed

• Here’s a chart I found surprising - apparently, if you exclude currency fluctuations from the MSCI EAFE Index (a popular index tracking companies in 21 developed countries including the UK, Japan, Germany, and Hong Kong), over a trailing 3-year return, it’s actually outperformed the S&P 500.

• However, since the US dollar has been so strong compared to global currencies, the global indexes have had a hard time competing (unless they’re currency hedged).

🚨 Now let me be clear - the point of this week’s Buzz isn’t that you should sell all your US stocks and S&P 500 ETFs - it’s merely to point out that you shouldn’t sleep on the global markets (especially with the backdrop of everything going on in the US).

So, how much of your portfolio should you allocate internationally? Well, according to Vanguard:

But of course, it’s up to you to decide on your own % based on your risk tolerance, goals, and beliefs on the US’ place in the future global economy.

🌍 Ok, So How Should I Globally Diversify?

To wrap up, let me leave you with four ideas on how to increase your international exposure based on what’s most popular on Blossom!

📊 Asset Allocation ETFs

• First off, if you want to buy and hold one ETF, or have one that’s the foundation of your portfolio, Asset Allocation ETFs are a great option as they typically come off the shelf internationally diversified to a similar % to what Vanguard recommended above.

• The most popular Asset Allocation ETFs on Blossom are FEQT, ZEQT HEQT, XEQT, and VEQT - which are all variations of equity asset-allocation ETFs from different fund providers

• Shout out FEQT, ZEQT, and HEQT from Fidelity, BMO, and Global X who are all Blossom partners and supporters of the Weekly Buzz!

🌍 Developed Markets ETFs

• Developed Market ETFs generally track an index - similar to the S&P 500, but with international companies instead. The most popular on Blossom is the MSCI EAFE Index, which we discussed above.

• You can get exposure to the MSCI EAFE Index from ZEA by BMO or XEF by BlackRock

💹 Emerging Markets ETFs

• While Developed Market ETFs are the most popular (as they are more similar to the US for volatility and potential returns), some investors like to get direct exposure to Emerging Markets like India, China, Egypt, South Africa, Mexico, and Russia - which generally have a higher risk but also the potential for higher returns

• Popular Emerging Markets ETFs include ZID by BMO (which directly tracks India), VEE, and XEC

📈 Individual Stocks

• Finally, if you like to pick your own stocks, you can also directly buy companies using CDRs which make it much easier to purchase international companies like Nintendo, Toyota, Mercedes, Nestle, and other giants. Both CIBC and BMO offer CDRs to make it easy to buy international stocks (which you can learn more about on their Blossom Learn & Earn!)

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FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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Guardian Capital Footnotes & Disclaimer:

_{^{(1) Source: Morningstar, for the 3 month period ended March 31, 2025.}}

_{^{As at Monday March 17th, 2025, updated weekly. Yield to Maturity (YTM) at Cost: The YTM (at Cost) shown is the weighted average Yield to Maturity at Cost of each of the underlying T-Bill securities in the portfolio, net of cash. Yield to Maturity at Cost means the percentage rate of return paid if the T-Bill security is held to its maturity date from the original time of purchase. The calculation is based on the coupon rate, length of time to maturity, and original price of the underlying T-Bill securities. This is not the yield, distribution rate or performance return of the Fund and is not intended to represent the distribution or return experience of any unitholder. It is only intended to give investors an idea of a particular portfolio characteristic of the underlying securities held in the Fund’s portfolio.}}

_{^{** The Fund’s units are offered, and its NAV is calculated, in USD.*}}

_{^{*** Based on a comparison of yields posted by the 5 largest HISA ETFs in Canada, as of March 31. Tickers for those ETFs are CSAV, PSA, HISA, CASH and HSAV.*}}