Tariff uncertainty and recession fears have pushed the US stock market downward in 2025.

The US stock market is currently grappling with significant volatility, heavily influenced by tariff uncertainties and recession fears. As of Monday, 2025 has seen the Nasdaq 100 experience a steep 4% decline in just one day, marking its most substantial drop since September 2022. This downturn came as the S&P 500 posted a year-to-date decline of 5%. Conversely, international stocks have shown a surprising resilience, with the Vanguard FTSE All-World ex-US ETF (VEU) achieving a 6.5% gain during the same time frame. This notable performance differential highlights the appeal of diversifying investments internationally, especially as market analysts, including Ed Yardeni of Yardeni Research, echo the need for a 'Go Global' strategy. In a significant shift, Citi strategists even downgraded US stocks to 'Neutral,' while elevating the outlook for Chinese stocks to 'Overweight.' Analysts point out that US investors have historically leaned towards domestic stocks, especially the Big Tech companies collectively referred to as the 'Magnificent 7.' However, with these giants witnessing a downturn, the diversification into international markets appears increasingly attractive. Experts advise that investing in international equities requires a nuanced approach, emphasizing the need to focus on companies rather than countries. High-quality international businesses, such as those within the sectors of healthcare, consumer goods, and even tech, offer potential for robust returns. For instance, firms like LVMH Moet Hennessy Louis Vuitton and Safran stand out as attractive investment opportunities. Meanwhile, ETFs like GMO's International Quality ETF provide a pathway to gain exposure to top-quality international stocks without unnecessary risk. In light of the current market volatility, particularly as US stocks face downward pressure, now may be an opportune moment for investors to explore international diversification, which can mitigate risks associated with overexposure to one geographical region. As this analysis has been reviewed by artificial intelligence, it's essential for investors to consider their portfolios proactively, adapt their strategies, and potentially embrace international markets.