MW The United States is now an emerging market. Invest accordingly.

By Brett Arends

You might say the U.S. is now an emerging market that sells for about 50% more than developed markets

I don't have one nickel invested in U.S. stocks these days, and after the fiasco of the past week I am not sorry. Actually, I find it insane and terrifying that so many ordinary U.S. investors have so much of their life savings in stocks, and especially in U.S. stocks, and have a kind of blind faith that these investments will reliably generate 10% or 15% or even 20% returns each year with very little risk.

It's nuts.

America is now an emerging market.

You could even call it a super-risky "frontier market." (OK, it still has the world's reserve currency - though, you have to wonder, for how long?). Emerging markets often have fast economic growth and dynamic economies. But they are also subject to damaging things like arbitrary and capricious government; naked self-dealing, or worse, by those in power; few protections for investors; and an approach to the rule of law that is, at best, inconsistent.

America, in 2025? Check, check, check and check.

I'm old enough to remember when we had three branches of government. Congress set things like budget and tax policy, the executive branch executed the laws, and the judiciary adjudicated. Now, apparently, all power is vested not only in the executive branch but in a small cabal at the top.

Elon Musk wants every government employee to send him an email listing the five things they did last week. Does this also apply to the 273 Republicans who are still drawing a salary from us taxpayers as congressmen or senators? I would love to read their replies. Sen. Rand Paul broke ranks recently to ask where in the Constitution it said that tax policy was set by the president (and at a whim, we might add). Presumably Paul will soon be primaried by a guy in a red hat.

Last Wednesday President Donald Trump arbitrarily imposed sweeping taxes on all imports to America. This Wednesday he arbitrarily abandoned them.

Did you catch the president's joke early Wednesday morning, by the way? Hours before our caudillo announced he was pausing his tariffs he sent out a message. You had to subscribe to the president's personal, for-profit public messaging service, Truth Social, to get it. "THIS IS A GREAT TIME TO BUY!!! DJT" he wrote.

The letters at the end aren't just his initials. They are also the stock-market ticker symbol for Trump Media & Technology Group $(DJT)$, the company that owns and operates Truth Social. Trump, through a revocable trust managed by his children, owns 52% of its stock. And, yes, it was "a great time to buy ... DJT." The stock, $16.66 before the president's message, rocketed 25% afterward amid the euphoria that he - unilaterally - had unleashed.

Personal gain for Trump and his family on the day? Up to $480 million. No, really: The 114.75 million shares owned by the Donald J. Trump Revocable Trust saw a maximum gain of $4.20 each.

(OK, so the stock is now falling again, along with the market.)

Trump announced his tariff pause just two days and a few hours after White House press secretary Karoline Leavitt said that reports the president was considering such a pause were - quote, unquote - fake news.

Hard luck to any American who took the president's official spokesperson at her word regarding government policy and cut their stock-market exposure in response.

Trump on Wednesday appeared to confirm that he had been mulling the pause "for a few days."

It is only a couple of weeks since Leavitt publicly denounced as a "hoax" - again: quote, unquote - a report that the U.S. defense secretary had sent confidential military plans to a journalist by an online messaging service. She made the comment even though the reports had already been confirmed.

This is frontier market "Comical Ali" stuff. Or, as Chico Marx once famously said, "Who you gonna believe - me, or your own eyes?"

In no other developed country I can think of would this happen - or would Leavitt still have a job.

I now get emails blaming all this market turmoil on George Soros. I'm not kidding. I was in a sandwich shop yesterday and heard the owner (a Republican, as he told me afterwards) blame the events of the past week on Joe Biden. And the first thing I thought was: "Wait - they've stopped blaming the Clintons?"

How long can we expect the U.S. to maintain a serious democracy when so many voters are so profoundly unserious?

We now have a government by the lawless, shameless and clueless. Administration officials currently claim that this entire fiasco was their plan all along. Let's pretend for a second we believe them. Consider the devastating costs to the economy. And to all the savings and retirement plans of ordinary working people?

It's one thing to criticize investors for bailing out of a long-term investment plan in the light of unforeseen market events, economic events or geopolitical events - such as 9/11, or COVID-19. But the administration created this entire debacle out of whole cloth.

The president declared economic war on the rest of the world, with few exceptions, and then went off on a jaunt to one of his golf courses. (If the president's airplane is Air Force One and the president's helicopter is Marine One, what is the name for the presidential golf cart? Caddyshack One?)

None of this means that U.S. stocks will necessarily go down or even produce bad returns over the next three, five or 10 years. Nobody knows these things, although lots of people pretend they do.

On the contrary, high-risk emerging and frontier markets can produce spectacular returns. You think the U.S. stock market has been on a tear for a decade? Romania has been better. So has Slovenia. So have Lebanon and Kazakhstan. You've tripled your money on the Kazakh stock market in the past decade, according to data provider MSCI.

But emerging and frontier markets are also risky and volatile. You can never be sure what you're really going to get. One day the caudillo and his junta say they have decided to return the country's trade policies to the 1880s, and announce they are declaring economic war against the rest of the world. Then a week later they announce they have called it off - after first tipping off investors on the caudillo's personal information and news service. In an emerging or frontier market, nobody expects the official spokesperson for the junta to tell the truth.

As a result of these risks, emerging and frontier stock markets are typically cheap. The Romanian stock market currently sells for nine times forecast earnings for the next 12 months, SG Securities tells me. Colombian stocks sell for an average of eight times forecast earnings. And Hungary and Turkey, both run by their own so-called strongmen: less than seven times earnings.

Overall, emerging-market stocks worldwide sell for an average of around 13 times forecast per-share earnings, SG calculates.

The U.S.? Somewhere between 20 and 25 times, depending on how you calculate it.

It makes no sense. Not only is the U.S. market grossly expensive compared with (other) emerging markets; it's also expensive compared with developed markets. You know - places that have political checks and balances, legislators who turn up for work, political leaders bound by laws, rules and civilized norms, and where they don't put budget policy in the hands of a guy waving a chainsaw in the air. Developed markets trade for just 13 times forecast earnings, according to SG data.

In other words, the U.S. is now an emerging market that sells for about 50% more than developed markets.

I don't know if stocks in places like Japan and Singapore and Australia and Switzerland and Germany and France and Britain and Sweden will generate higher returns than those in the U.S. in the years ahead. But I know they are much cheaper. And it's pretty apparent now that they will entail a lot less risk.

I don't invest where there isn't the rule of law. And I don't want to invest in a country where the market is being controlled by a caudillo and his cabal, and in order to make money I need to sign up for their for-profit information service to get inside stock tips before they change government policy.

Thanks. But no thanks.

Read on:

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Billionaire fund managers clash over Trump tariff strategy

Yes, Bill Ackman, this is exactly what you voted for

Peter Navarro is the architect of Trump's tariff policy. Elon Musk is not impressed.

-Brett Arends

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April 10, 2025 15:06 ET (19:06 GMT)

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