Insights

After several years of deliberation, we launched the DM International Equity Fund at the beginning of Q3-2025 with the view that foreign markets currently offer compelling relative value. We seeded the mandate with an allocation to the iShares MSCI EAFE ETF to provide immediate exposure to major non-North American benchmarks, which we would then methodically convert to a fully managed format as our comprehensive research on each stock was completed and/or opportunities presented themselves.

As the S&P 500 continues its march higher, a common observation (and a factor that we’ve pointed out in the past) is that US market performance has been dominated by a small number of very large, “new economy” oriented companies. Though the rise in these market leaders has been mostly supported by earnings growth, some now argue that prices are starting to outrun fundamentals.

It’s no secret that US stocks have soundly outperformed their global peers for the better part of two decades, meaning that Canadian managers (such as DM) who’ve directed their foreign exposure to American names have been well-rewarded over time. The common answer for why this has occurred is that the US economy is more dynamic than most of the rest of the world and that the S&P 500 is populated with more innovative companies, valuable global brands, and effective management teams than other major markets. While this is true, not all of the S&P’s advantage can be attributed to corporate superiority.

Prior to the US election and in the weeks leading up to inauguration, Donald Trump repeated both his affection for tariffs and his plan to deport millions of undocumented and, presumably, low wage foreign workers.

If you’ve recently been following US politics – or much of contemporary Americana for that matter – these might not be the first two words that spring to mind…

In the next issue of this commentary, we could very well be talking about a quarterly decline for your equity allocation, and it may be more than just a speed bump.