J. David Flagg
Published: March 12, 2025
Before founding Cape May AI, I was an amateur economist, an adult educator, and, perhaps most importantly, a bitcoiner. Some of you might not yet fully grasp the concept of being a bitcoiner, but you soon will. I continue to embrace all these roles today, giving me a unique perspective on business and economics.
However, it seems that today’s world—or more specifically, those with prominent public platforms such as mainstream media—is determined to divide society rather than inform it. When I was growing up in the ’70s, media organizations prioritized reporting factual news over sensationalizing stories to create division among families, friends, and communities worldwide. Unfortunately, contemporary news outlets have transformed into platforms for opinion-based conflict, amplifying the voices of so-called “experts” who often base their arguments solely on emotionally charged social media posts.
But wasn’t this post meant to discuss AI? Perhaps—but today, I want to shift gears and talk about the economy.
The new America-first White House administration appears unconcerned with the temporary dip in the U.S. stock market rankings. Early in 2025, U.S. stocks quickly transitioned from global market leaders to laggards, as the S&P 500 lost its dominance to international indices. Washington, notably, seems largely unfazed by this shift, though investors are understandably unsure how to react—at least some of us. President Trump has openly dismissed speculation about a potential “Trump Put,” the expected government intervention to support declining markets. He reinforced this stance recently by stating that he does not monitor asset prices, offering traders little comfort as the S&P 500 dropped by 0.76%, and the Nasdaq Composite fell by 0.28% (Opening Bell Daily, 2025).
However, one day’s performance doesn’t reveal the entire story. Following a possibly inflated surge in 2024, U.S. equities now substantially trail behind global counterparts, reflecting their largest performance gap in recent memory.
Currently, the MSCI USA index—tracking large and mid-cap U.S. stocks—trades at 21 times forward earnings. Simply put, investors are paying $21 for every expected dollar of future earnings. In contrast, the MSCI All-Country World ex-US index trades at a more moderate 14 times forward earnings, or $14 per dollar of expected earnings (Yardeni Research, 2025). Based on these figures, the U.S. market appears significantly overvalued compared to global peers, indicating potential investment opportunities abroad. Analysts from Yardeni Research underscore this point, highlighting international markets’ significant growth potential, describing the global catch-up trade as having “a very high ceiling” (Yardeni Research, 2025).
The primary driver behind this shift appears to be the inconsistent and fluctuating policies around trade tariffs, which have contributed to investor caution. Nonetheless, some market experts remain optimistic about U.S. equities. JPMorgan’s David Lebovitz sees the recent market pullback as a potential buying opportunity, especially if the S&P 500 falls below the 5,500 level (Lebovitz, 2025). Why the optimism? Because seasoned investors know that historically, emotional reactions rarely drive wise investment decisions.
Similarly, Liz Young Thomas of SoFi notes that recent market declines have been driven more by negative sentiment than underlying fundamentals. She points out that tech and financial stocks—leaders of the 2024 rally—are now facing considerable declines, primarily due to sentiment-driven sell-offs. Thomas highlights that the S&P 500 sits about 9% below its historic high, yet analysts’ price targets remain unchanged, suggesting an 18% potential upside. Historically, movements like these, driven by stable fundamentals, signal favorable prospects for future returns (Thomas, 2025). To put it in simpler terms—think of it as a “blue-light special,” a familiar reference for those of us who remember K-Mart.
In conclusion, the market’s current turbulence leaves investors and the broader public at a crossroads. Many hastily criticize the current administration’s perceived indifference, obsessing over short-term market fluctuations. However, the administration’s apparent detachment could reflect a strategic pause rather than negligence, allowing the market to recalibrate naturally in preparation for future global trade developments.
References:
Lebovitz, D. (2025). Market Outlook Note. JPMorgan Asset Management. Retrieved March 12, 2025.
Opening Bell Daily. (2025). Market Performance Update, January 2025 Edition.
Thomas, L. Y. (2025). Market Insights Post [X Post].
Yardeni Research. (2025). Global Equity Valuation Analysis Report. Yardeni Research, Inc.
Reach out to Cape May AI to discuss any questions you may have, and may 2025 be your most-profitable year ever and the most-memorable year for you customers. Ever!
@Copyright 2025
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