How Global Investing is Changing
MODERNIST’S ASSET CLASS INVESTING PORTFOLIOS ARE STRATEGICALLY INVESTED WITH A FOCUS ON LONG-TERM PERFORMANCE OBJECTIVES. PORTFOLIO ALLOCATIONS AND INVESTMENTS ARE NOT ADJUSTED IN RESPONSE TO MARKET NEWS OR ECONOMIC EVENTS; HOWEVER, OUR INVESTMENT COMMITTEE EVALUATES AND REPORTS ON MARKET AND ECONOMIC CONDITIONS TO PROVIDE OUR INVESTORS WITH PERSPECTIVE AND TO PUT PORTFOLIO PERFORMANCE IN PROPER CONTEXT.
For the past several years, owning big U.S. companies—especially well-known, global brands—was one of the easiest ways to make strong investment returns. These companies didn’t just grow by selling to American customers. They earned even more by expanding around the world. In fact, nearly 40% of sales for companies in the S&P 500 now come from outside the U.S.
But the global landscape is shifting. Rising trade tensions and political uncertainty are making investors and policymakers pay closer attention to where companies do business, not just where they’re headquartered. In today’s environment, a company’s exposure to foreign markets (especially the U.S.) can have a big impact on its performance.
Rethinking Global Diversification
For investors, understanding where a company earns its money is just as important as knowing what it does. For instance, a U.S.-based company might still rely heavily on foreign customers or supply chains to keep things running.
In the past, global reach was seen as a strength. U.S. companies that sold products overseas could grow faster and reward shareholders. But now, operating internationally may bring more risk due to politics, trade policies, and other global factors due to the unprecedented behavior of the current adminstration.
Year-to-date through April 2025:
• U.S. companies with significant foreign sales have experienced declines. The S&P 500 Index, which includes many multinational firms, was down 4.92%.
• U.S. companies that mostly sell domestically have also declined. The S&P SmallCap 600 Index, representing such firms, was down 12.74%.
• International equities—represented by the MSCI EAFE Index—have outperformed their U.S. counterparts—represented by the S&P 500 Index—by 16.68%.
That old saying, “When the U.S. sneezes, the world catches a cold,” doesn’t seem to be holding true this year as U.S. stocks are not faring as well as international ones.
Where Companies Make Their Money Matters
Different types of stocks have different revenue profiles:
• Big U.S. tech companies usually sell more abroad.
• Value stocks like banks or utilities are more focused on the U.S.
• Small U.S. companies mostly sell locally—only about 20% of their sales come from outside the country.
In contrast, publicly traded international companies—especially those in emerging markets or smaller foreign firms—generally make around 12% to 14% of their sales from U.S. customers. They’re less tied to the American economy.
What About the Trade Deficit?
If U.S. companies make so much money overseas, you might wonder why the U.S. still runs a trade deficit. The short answer: many of the things U.S. companies sell abroad are made overseas. So, while the profits come back to the U.S., the goods often don’t.
Take China, as an example. Even though the U.S. has a trade deficit of nearly $300 billion with China, S&P 500 companies earn over $1.1 trillion there. Brands like McDonald’s (with over 6,800 restaurants in China), Walmart (with 364 stores), and Apple (which sold 43 million iPhones there in 2024) are major players in the Chinese market. (1)
So, while the U.S. may look like it’s losing in trade, U.S. companies are actually doing well from a profits standpoint.
What Could You Do as an Investor?
As the global picture evolves, it’s important to make sure your investment strategy reflects the opportunities and risks. Speak with your advisor to ensure your portfolio is well diversified and built to withstand global market cycles.
