Payden & Rygel: US vs Global Financial Markets YTD Returns
As the U.S. approaches the Independence Day holiday, we compare financial market performance at home and abroad for the first half of 2025. U.S. trade policy uncertainty and geopolitical concerns created the recipe for market volatility. So far this year, both U.S. domestic equity and bond markets have underperformed compared to their international counterparts.
The U.S. dollar also weakened by 11%, fueling the narrative that capital is fleeing the U.S. Still, we remain skeptical of these narratives. The long-term drivers of U.S. exceptionalism have not undergone fundamental change. The U.S. remains the land of innovation and enjoys the world's deepest and most liquid capital markets - key drivers of continued productivity growth.
Looking ahead, trade policy uncertainty persists but has moderated since Aprll. Fiscal concerns still loom, but most major economies face similar budget pressures. Further, we expect the Fed to cut rates most among the major central banks in the second half of 2025 as U.S. inflation moderates. Historically, the Fed cutting rates outside a recession has supported U.S. assets. Will we look back on the first half of 20925 as just a blip or a lasting shift?
