Global markets digested a week packed with trade breakthroughs, monetary policy signals, <a href="https://www.benzinga.com/topic/digital-assets">and digital asset milestones</a>.



Wall Street remains cautiously optimistic as the Trump administration intensifies efforts to strike favorable trade deals. Hopes were buoyed by a high-level summit between U.S. and Chinese officials in Switzerland over the upcoming weekend. Investors view the meeting as a <a href="https://www.benzinga.com/25/05/45294428/wall-street-rallies-after-us-seals-first-trade-deal-you-better-go-out-and-buy-stock-trump-says">step toward de-escalation.</a>



Meanwhile, the Trump administration unveiled a trade agreement with the U.K. A 10% baseline tariff remains, but the U.S. intends to cut duties on U.K. car imports <a href="https://www.benzinga.com/politics/25/05/45293839/trump-starmer-strike-us-uk-trade-deal-steel-cars-beef">from 25% to 15%.</a> 



In return, the U.K. reduced tariffs on U.S. vehicles and slashed agricultural duties, bringing levies on American beef and other key exports near zero. In addition, British Airways placed a $13 billion order for Boeing Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BA#NYSE">BA</a>) aircraft.



On the macro front, the Federal Reserve held its policy rate steady at 4.25%-4.50% for a third consecutive meeting, underscoring concerns over lingering inflationary pressures and labor market damage <a href="https://www.benzinga.com/economics/macro-economic-events/25/05/45263291/fed-keeps-rates-steady-warns-of-rising-uncertainty-about-the-economic-outlook">amid trade-related risks.</a>



Fed Chair Jerome Powell struck a cautious tone and resisted expectations of imminent rate cuts, reiterating that monetary policy <a href="https://www.benzinga.com/government/regulations/25/05/45266366/powell-flags-sharp-tariff-shock-elevated-uncertainty-fed-sticks-to-wait-and-see-mode">will remain data-dependent.</a> Powell dismissed recession fears, attributing the weakness in first-quarter economic data to distortions in trade flows.



Still, a growing number of economists now warn that stagflation—a toxic mix of high inflation and stagnant growth—could be around the corner, straining the Fed's <a href="https://www.benzinga.com/economics/macro-economic-events/25/05/45269703/stagflation-emerges-as-key-economic-risk-to-federal-reserve-policy-economists-warn">dual mandate.</a>



Market pricing for rate cuts has shifted accordingly. As of now, futures imply just a 20% probability of a 25-basis-point cut in June.



In equities, The Walt Disney Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DIS#NYSE">DIS</a>) reached the top of the mega-cap leaderboard. This follows robust earnings and a new theme <a href="https://www.benzinga.com/markets/equities/25/05/45276805/disneys-30-billion-theme-park-bet-pays-off-as-bob-iger-touts-all-time-high-returns-stock-rallies-10-after-q2-earnings">park announcement for Abu Dhabi.</a>



Eli Lilly &amp; Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LLY#NYSE">LLY</a>) extended last week's decline following disappointing guidance, weighing heavily on <a href="https://www.benzinga.com/content/45261458/is-eli-lilly-a-buy-after-weak-earnings-and-cvs-novo-partnership">the broader healthcare sector.</a>



Cryptocurrencies staged a dramatic comeback. Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) breached the $100,000 threshold. The top digital asset hit levels last seen in February as optimism around trade <a href="https://www.benzinga.com/markets/cryptocurrency/25/05/45295626/bitcoin-breaks-100000-ethereum-xrp-dogecoin-roar-10-higher-what-do-experts-predict-next">diplomacy lifted risk sentiment</a>.



The rally was broad-based, with Ethereum (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/eth/usd">ETH</a>) jumping over 25% on the week following <a href="https://www.benzinga.com/markets/cryptocurrency/25/05/45314930/ethereum-explodes-higher-largest-gain-in-four-years">a major network upgrade.</a>



Now Read:



<ul class="wp-block-list">
<li><a href="https://www.benzinga.com/government/regulations/25/05/45317301/5-treasury-yields-could-force-trump-to-slash-tariffs-in-q2-says-bofas-hartnett">5% Treasury Yields Could Force Trump To Slash Tariffs In Q2, Says BofA&#8217;s Hartnett </a></li>
</ul>



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Fed Stays Put, Trump Touts UK Trade Deal, Bitcoin Booms Past $100K, Stagflation Fears Rise: This Week In Markets

It's been a great decade. It's been hard not to make money in U.S. stocks.



To lose money over the past ten years, you would have had to chase every bad idea that came down the pike, from SPACs and Crowdfunding to inverse QQQ funds.



If you were determined not to compound your cash at double-digit levels, you could have used covered call funds to cut your returns in half.



If you just owned the indexes or the large-cap, well-known companies, you made excellent returns.



But now, it looks like the party is coming to an end. All five of the world's most reliable long-term market indicators say the same thing: The party in U.S. stocks is over.



Here's why and where to invest instead.



As investors assess the road ahead after a long stretch of stellar U.S. equity performance, the key question is where the next decade's returns will come from. Using the most reliable long-term indicators—CAPE ratios, excess CAPE yields, market cap to GDP, and investor allocation levels—the message is straightforward: The U.S. is expensive. Japan and Europe look far more promising.



Before we get into the comparisons, here's a quick overview of the tools we're using:



<ul class="wp-block-list">
<li>CAPE Ratio (Cyclically Adjusted P/E): Price divided by the 10-year average of inflation-adjusted earnings. A higher CAPE generally signals lower future returns.</li>



<li>Excess CAPE Yield (ECY): The inverse of the CAPE ratio (earnings yield) minus the 10-year government bond yield. A higher ECY means stocks offer more yield relative to bonds—historically, a strong signal for forward equity returns.</li>



<li>Market Cap to GDP: A broad valuation gauge comparing total equity market value to the size of the economy. Higher readings often suggest lower long-term returns.</li>



<li>Investor Allocation to Equities: Measures the share of household wealth held in stocks. High equity exposure often signals crowded positioning and lower future returns.</li>



<li>Tobin's Q: Market value of companies compared to the replacement cost of their assets. When Q is high, the market is expensive relative to its real-world capital base.</li>
</ul>



<h1 class="wp-block-heading">U.S. Stocks: Expensive And Well-Owned</h1>



Let's start with the U.S., where the CAPE ratio is north of 33, placing it in the top 5% of historical observations. The inverse CAPE yield is under 3%, while the 10-year Treasury yield sits around 4.45%. That gives us a negative excess CAPE yield of -1.6%—a red flag by historical standards. It means investors earn less from stocks than from safe government bonds when adjusted for valuation.



Market cap to GDP is pushing 175%, and household equity allocations are near all-time highs around 45%. In past cycles, these conditions have corresponded with real returns of just 1–2% per year, or 3–4% nominal, assuming 2% inflation. Investors expecting a repeat of the last decade's performance may be in for a disappointment.



<h1 class="wp-block-heading">Japan: Solid Valuations, Positive Yields, Room to Re-Rate</h1>



Japan offers one of the most attractive long-term setups in the developed world. The Topix CAPE is around 18, with an inverse CAPE yield of 5.3%. The 10-year JGB yield, still under 1%, puts the excess CAPE yield at a very strong 4.45%. That signals that Japanese equities offer far better return potential than domestic bonds.



Household equity allocations in Japan remain low—12% to 15%—and shareholder-friendly reforms continue to gain steam. With a dividend yield near 2.5% and improving capital efficiency, the models suggest real returns of 5–6%, with nominal returns around 6.5–7.5% annually. If capital flows accelerate, those numbers could improve.



Tobin's Q in Japan is close to 1.0, suggesting that market prices are in line with replacement costs. That's a neutral-to-positive valuation signal.



<h1 class="wp-block-heading">Europe: Reasonable Valuations, High Dividends, Undervalued Potential</h1>



Europe sits somewhere between the U.S. and Japan. The CAPE ratio is near 16.5, and earnings yields are strong at 6%. With sovereign yields averaging around 2.8%, the excess CAPE yield is a healthy 3.2%. That's historically consistent with mid-single-digit real returns.



Market cap to GDP across the region is around 85%, and equity allocations remain modest. The dividend yield stands at 3.4%, and valuations are well below U.S. levels. Tobin's Q is also in the 0.9 to 1.0 range—indicating fair to slightly undervalued conditions.



If the EU's capital markets integration efforts gain traction and political risks stay contained, forward nominal returns in the 6.5–7.5% range look reasonable.



<h1 class="wp-block-heading">The Bottom Line</h1>



The data speaks for itself. U.S. stocks are priced for low single-digit returns. Japan and Europe, on the other hand, offer valuation support, earnings power, and structural room to re-rate higher.



Investors who think globally and allocate accordingly may be rewarded not just with diversification but also with better absolute returns.



As always, valuation matters, and the case for going global is stronger than it has been in years.



<h2 class="wp-block-heading">While Markets Fell, ROOT Did This&#8230;</h2>



When most stocks struggled, ROOT followed a post-earnings pattern. Register for and watch <a href="https://events2.benzinga.com/erx-gaps-workshop-may-2025-registration/?utm_campaign=ERxMay&amp;el=ResearchDaily&amp;he={{email}}&amp;adt_ei={{email}}&amp;utm_adType=SponsorAd&amp;utm_ad=RD0510">this free masterclass</a> to see how it works and which stocks might be next. 



Editorial content from our Expert contributors is intended to be information for the general public and not individualized investment advice. Editors/contributors are presenting their individual opinions and strategies, which are neither expressly nor impliedly approved or endorsed by Benzinga.



Photo: Shutterstock

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The Party In US Stocks Is Over - Invest Here Instead

U.S. stock futures fluctuated between gains and losses on Friday, following a three-day winning streak. Major benchmark index futures were mixed in premarket trading.



The U.S. and U.K.<a href="https://www.benzinga.com/25/05/45293839/trump-starmer-strike-us-uk-trade-deal-steel-cars-beef"> sealed a bilateral trade deal</a>, cutting tariffs, boosting industrial ties, and securing billions in new market access. 



A central component of the trade agreement involves the U.S. significantly reducing tariffs on cars made in the UK, bringing them down from 25% to 10% and establishing an annual quota of 100,000 vehicles.



The U.K. will eliminate tariffs on American-made cars, including those from General Motors Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GM#NYSE">GM</a>) and Ford Motor Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/F#NYSE">F</a>), and expedite their passage through customs.



Meanwhile, the 10-year Treasury bond yielded 4.37% and the two-year bond was at 3.86%. The CME Group's FedWatch <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">tool</a>&#8216;s projections show markets pricing an 82.9% likelihood of the Federal Reserve keeping the current interest rates unchanged in its June meeting. 



<figure class="wp-block-table is-style-stripes"><table class="has-fixed-layout"><tbody><tr><td>Futures</td><td>Change (+/-)</td></tr><tr><td>Dow Jones</td><td>-0.15%</td></tr><tr><td>S&amp;P 500</td><td>0.07%</td></tr><tr><td>Nasdaq 100</td><td>0.17%</td></tr><tr><td>Russell 2000</td><td>-0.23%</td></tr></tbody></table></figure>



The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) and Invesco QQQ Trust ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), which track the S&amp;P 500 index and Nasdaq 100 index, respectively, were slightly higher in premarket on Friday. The SPY was up 0.004% to $565.08, while the QQQ advanced 0.17% to $489.10, according to <a href="https://pro.benzinga.com/dashboard">Benzinga Pro</a> data.



Cues From Last Session:



Industrials, consumer discretionary, and energy sectors led a<a href="https://www.benzinga.com/news/earnings/25/05/45311238/dow-surges-250-points-after-us-announces-first-trade-deal-investor-sentiment-improves-fear-greed-index-remains-in-greed-zone"> broad market rally on Thursday</a>, propelling U.S. stocks higher. The Dow Jones was bolstered by the Donald Trump administration&#8217;s inaugural major trade agreement with the United Kingdom.



However, the health care and utilities sectors diverged from the positive trend, closing lower.



On the company-specific front, U.S. Foods Holding Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USFD#NYSE">USFD</a>) reported first-quarter earnings that fell short of expectations, while Sezzle Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SEZL#NASDAQ">SEZL</a>) shares surged by 42% following the company&#8217;s release of better-than-anticipated first-quarter results and an upward revision of its FY25 guidance.



In terms of economic data, U.S. initial jobless claims saw a decline, dropping by 13,000 to 228,000 for the week ending May 3, slightly below market projections. 1 Conversely, U.S. labor productivity in the nonfarm business sector experienced a 0.8% decrease during the first quarter, slightly exceeding the estimated 0.7% drop.



The Dow Jones index advanced 255 points or 0.62% to 41,368.45, whereas the S&amp;P 500 index rose 0.58% to 5,663.94. Nasdaq Composite ended 1.07% higher at 17,928.14, and the small-cap gauge, Russell 2000, climbed 1.85% to 2,026.41.



<figure class="wp-block-table is-style-stripes"><table class="has-fixed-layout"><tbody><tr><td>Index</td><td>Performance (+/-)</td><td>Value</td></tr><tr><td>Nasdaq Composite</td><td>1.07%</td><td>17,928.14</td></tr><tr><td>S&amp;P 500</td><td>0.58%</td><td>5,663.94</td></tr><tr><td>Dow Jones</td><td>0.62%</td><td>41,368.45</td></tr><tr><td>Russell 2000</td><td>1.85%</td><td>2,026.41</td></tr></tbody></table></figure>



Insights From Analysts:



According to Louis Navellier of Navellier &amp; Associates, &#8220;Tariffs are steering the boat again.&#8221;



He said that Trump&#8217;s announcement of the U.S. striking a comprehensive agreement with the U.K. and Scott Bessent&#8217;s announcement of a meeting in Switzerland with China to discuss tariffs are propelling the market.



&#8220;This helps explain the long recovery rally since the Liberation Day announcement of tariffs on April 2nd. The fear of missing out on favorable agreements being reached has limited the number of sellers,&#8221; he said.



He added, &#8220;The upside story will be that the tariff agreements will result in mutually low tariffs, which should be generally beneficial for U.S. exporters, as Trump has contended all along.&#8221;



He also said that Trump announcing a definitive deal with the U.K. is an &#8220;important first step in reducing tariff fears.&#8221;



Meanwhile, Ed Yardeni or Yardeni Research agreed with the sentiment and added, &#8220;President Donald Trump will need to declare victories in his trade wars with multiple countries around the world sooner rather than later.&#8221;



Yardeni also explained that Trump and his fellow Republicans have to avoid a recession caused by his tariff wars. Otherwise, they risk losing their thin majorities in both houses of Congress later in 2026, as per Yardeni.



&#8220;The correction in the S&amp;P 500 that started on February 19 ended on April 8. The S&amp;P 500 now has regained almost all its losses since the April 2 close, just before it tanked during the Annihilation Days on April 3 and April 4,&#8221; he said.



According to Yardeni, the stock market will soon have &#8220;deals fatigue and tire of Trump&#8217;s declarations of victory.&#8221;



&#8220;We think the trade issue will be behind us by July or August. If so, then the focus should be on how much Trump&#8217;s tariff skirmishes weighed on the economy and earnings. We expect both will remain surprisingly resilient,&#8221; he added.



See Also: <a href="https://www.benzinga.com/money/how-to-trade-futures">How to Trade Futures </a>



Upcoming Economic Data



Here&#8217;s what investors will keep an eye on Friday:



<ul class="wp-block-list">
<li>Fed Governor Michael Barr will speak at 5:55 a.m., New York Fed President John Williams will speak at 6:15 a.m., and Fed Governor Adriana Kugler will speak at 6:45 a.m. ET.</li>
</ul>



-Fed Governor Lisa Cook will speak at 6:45 a.m. ET.



<ul class="wp-block-list">
<li>Richmond Fed President Tom Barkin speaks at 8:30 a.m., Fed Governor Christopher Waller and New York Fed President John Williams will speak on a panel at 11:30 a.m. ET.</li>
</ul>



<ul class="wp-block-list">
<li>Fed Governor Michelle Bowman, St. Louis Fed President Alberto Musalem, and Fed Cleveland President Beth Hammack will speak on the panel at 7:45 p.m. ET.</li>
</ul>



Stocks In Focus:



<ul class="wp-block-list">
<li>EchoStar Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SATS#NASDAQ">SATS</a>) fell 3.53% in premarket on Friday as it is expected to report earnings before the opening bell. Analysts expect a quarterly earnings loss of 88 cents per share on the revenue of $3.87 billion.</li>
</ul>



<ul class="wp-block-list">
<li>Plains All American Pipeline LP (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/PAA#NASDAQ">PAA</a>) was up 1.18% as Wall Street expects it to report earnings of 43 cents per share on revenue of $14.26 billion before the opening bell.</li>
</ul>



<ul class="wp-block-list">
<li>LYFT Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LYFT#NASDAQ">LYFT</a>) jumped 7.31% after reporting better-than-expected earnings for the first quarter and announcing a $750 million share buyback plan.</li>
</ul>



<ul class="wp-block-list">
<li>Sensata Technologies Holding PLC (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ST#NYSE">ST</a>) rose 9.13% after reporting better-than-expected first-quarter financial results and issuing strong guidance for the second quarter.</li>
</ul>



<ul class="wp-block-list">
<li>Coinbase Global Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/COIN#NASDAQ">COIN</a>) dropped 1.26% after reporting worse-than-expected first-quarter financial results. Coinbase reported first-quarter total revenue of $2.03 billion, missing a Street consensus estimate of $2.12 billion.</li>
</ul>



<ul class="wp-block-list">
<li>Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TSM#NYSE">TSM</a>) was 2.20% higher after its April sales surged on the back of rushed orders following the levy of U.S. tariffs.</li>
</ul>



<ul class="wp-block-list">
<li>Twin Vee Powercats Co. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VEEE#NASDAQ">VEEE</a>) plunged 37.85% after it announced the fundraise of $3 million by pricing its public offering of 750,000 shares of common stock at $4.00 per share.</li>
</ul>



Commodities, Gold, And Global Equity Markets:



Crude oil futures were trading higher in the early New York session by 1.59% to hover around $60.86 per barrel.



Gold Spot US Dollar rose 0.65% to hover around $3,327.68 per ounce. Its last record high stood at $3,500.33 per ounce. The U.S. Dollar Index spot was lower by 0.26% at the 100.3830 level.



Asian markets were mixed on Friday as India's S&amp;P BSE Sensex, South Korea's Kospi, and China&#8217;s CSI 300 index fell. While Japan's Nikkei 225, Australia's ASX 200, and Hong Kong's Hang Seng index rose. European markets were higher in early trade.



Read Next:



<ul class="wp-block-list">
<li><a href="https://www.benzinga.com/25/05/45310899/quantum-computing-aids-energy-efficiency-for-blockchain-hashing-require-a-fraction-of-the-electricity-used-by-classical-resources-says-d-wave-ceo">Quantum Computing Aids Energy Efficiency For Blockchain Hashing: &#8216;Require A Fraction Of The Electricity Used By Classical Resources,&#8217; Says D-Wave CEO </a></li>
</ul>



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US Stock Futures Flicker Between Gains And Losses After Strong Three-Day Run: 'Tariffs Are Steering The Boat Again,' Says Expert

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