If you thought American threats, tariffs, and nearshoring would’ve tanked global stocks, you might want to think again. While America’s withdrawal from business as usual initially had its impact on other international currencies, stocks, and bonds, investors are now trading places — with the S&P 500 falling 7.8% over the past month and downtrodden markets in Europe and Asia rallying.

• Europe has four of the top five stock markets to start the year, spurred higher by a defensive pivot towards health care and defense stocks — the Vanguard European Stock IndexVGK
  is up 15.3% year-to-date.
• China’s Hang Seng Index is the world’s top-performing, up 23% YTD thanks to new government-sponsored stimulus and inflows into the country’s tech sector.

Diversification remains key: The Financial Times reports that “most European indices are up 12% or more in dollar terms,” but aside from stock returns alone, many countries are also benefiting from favorable foreign exchange (fx) swings, handing their market even more positive gains relative to the dollar. That’s because the dollar has been weakening in light of recent economic data, which is seen as a recession indicator and a potential catalyst for lower rates and, thus, a weaker dollar. It’s just a reminder that diversification remains important — especially when dealing with so many great unknowns.