00:03.82 — Michael Zeuner: Hi, everyone. This is Michael Zeuner, one of the managing partners at WE Family Offices. Thanks for listening to the Wealth Enterprise Briefing. I’m joined today by our Chief Macro Analyst, Sam Sudame, a familiar voice on our podcast. We’re going to spend some time talking about — with apologies to Charles Dickens — a tale of multiple cities, not just two. We’re sitting here in the middle of May, and when I look at global stock markets, the broad-based measure of global equities — the ACWI — is up roughly 10%. Let’s put aside the fact that there’s a war, the Straits of Hormuz are closed, and geopolitical tensions have been extremely elevated. This year has been another example of the “Rip Van Winkle strategy” — being a long-term investor and riding through volatility. If you had gone to sleep on January 1 and woken up on May 15, you might not even realize what had happened in the world. But when you look beneath the surface of that 10% global return, there are some major differences. The S&P 500 is up about 8.5%. Europe is up around 5.5%. Japan is up 14%. Germany is flat. France is up 1%. Taiwan is up 50%. Korea is up 90%. Brazil is up 23%. While the average comes out to around 10%, there are significant differences in how markets around the world are performing. Some of that is related to the geopolitical situation and the closure of the Straits of Hormuz, though probably not in ways that are intuitively obvious. So let’s go a little deeper. Welcome, Sam. Give us your perspective.
02:34.113 — Sam Sudame: Depending on the country, equity market performance is being driven either by short-term cyclical forces caused by energy disruption or by the longer-term secular forces driving their respective markets. What we’re seeing is very broad dispersion among global markets. In the United States, for example, the S&P 500 was down through March as investors focused on the cyclical impacts of energy disruptions tied to the Straits of Hormuz. Then April came, and we experienced one of the sharpest rebounds the market has ever seen as investors shifted their focus toward the longer-term opportunities surrounding AI. That’s how I would frame it. On one hand, you have the cyclical effects of a supply-side shock causing higher inflation and lower economic growth globally. On the other hand, markets are asking where the long-term structural opportunities are.
03:56.108 — Michael Zeuner: Let’s go one level deeper. On one side, you have economies benefiting from AI investment — chips, data centers, infrastructure — where the U.S. clearly falls into that category. On the other side, you have the counterbalancing effects of rising energy prices and inflation stemming from the war and the closure of the Straits of Hormuz. How do those forces play out differently across markets? Let’s look at the U.S., which makes up roughly 60% to 65% of global market capitalization and is up around 8%. Then let’s compare that to France and Germany, which are essentially flat, and finally Japan, Taiwan, and Korea — countries you might assume would be heavily impacted by rising energy prices given their dependence on imports. Talk to us about the differences.
05:15.042 — Sam Sudame: Take Germany first. Germany’s market has focused heavily on the short-term cyclical environment. It has a very traditional economy built around heavy industry and relatively little exposure to AI-related growth. Germany also has energy reserves estimated at only about three months, making it one of the countries most negatively affected by the energy shock. Its PMI data has moved into contraction territory and is among the weakest in developed markets. Higher energy prices are also contributing to inflationary pressure, leading to expectations that the ECB could raise rates three times this year. As a result, the German stock market is close to flat for the year. France and Switzerland have experienced similar dynamics. Continental Europe, broadly speaking, has suffered from the effects of what’s happening in the Straits of Hormuz. That said, Germany still has attractive long-term secular opportunities. Last year, markets responded positively to a massive amount of approved government investment. Germany passed a €500 billion infrastructure package and nearly doubled its military budget from roughly €86 billion to €152 billion annually. Markets responded very favorably to that in 2025, when German equities were up roughly 37% in dollar terms.
07:11.342 — Michael Zeuner: Thirty-seven percent in dollar terms.
07:14.078 — Sam Sudame: Exactly. France also performed well during that period. In the United States, however, the story shifted. The first three months of the year were dominated by concerns over higher energy prices. Then the market pivoted toward high-tech and AI opportunities, leading to a very concentrated but extremely powerful rally in April. That’s why the S&P 500 is now up roughly 8% to 9% year to date.
07:57.666 — Michael Zeuner: Now let’s move to the Asian economies that have been on fire — Taiwan and Korea especially. We’ll come back to India, but let’s start there.
08:10.818 — Sam Sudame: Let’s begin with Japan because it’s a developed market. Japan, like Germany, is highly dependent on Middle Eastern energy, but it appears to be better stocked in terms of reserves. More importantly, Japan’s market has focused on structural improvements — particularly increasing shareholder returns through better capital efficiency. That has resulted in strong stock market performance and record levels of foreign investor buying. In fact, April saw the largest month of foreign buying in Japanese history. Japan’s market is up double digits this year, roughly double the return of the S&P 500, following a very strong 2025. Japan also benefits from the AI cycle because it produces advanced chemicals and semiconductor equipment that support the industry. Now, looking at emerging markets, there are really three major themes. The first is the high-tech story centered around South Korea and Taiwan. The second is India, which represents a more traditional emerging market development story. And the third is China, which is an upgrading economy. South Korea’s market is dominated by high-tech companies producing semiconductors and memory hardware essential to AI infrastructure. Investors have focused heavily on the long-term AI theme, and Korea has become one of the dominant beneficiaries. The Korean market rose about 100% last year and is up another 90% this year. Expected earnings growth is around 180%, similar to last year. South Korea’s manufacturing PMI in April expanded at its fastest pace in more than four years due to semiconductor demand. Taiwan has seen similar strength. Its market is up roughly 50% this year after gaining 40% last year, and earnings growth is expected to be around 40%. The AI theme remains the dominant driver across the high-tech economies of Asia.
11:20.626 — Michael Zeuner: So it’s becoming clearer. Countries with meaningful AI exposure and strong secular trends — like Japan — are powering through. Countries deeply invested in the AI opportunity — like Korea and Taiwan — are effectively turbocharged. Meanwhile, countries with some secular opportunity but limited AI exposure, like parts of continental Europe, are struggling because the cyclical pressures are outweighing the long-term story. Where does India fit into all of this?
12:11.842 — Sam Sudame: India doesn’t have much AI-related exposure. It’s more of a traditional emerging market development story. GDP per capita is still below $3,000, and the growth story centers around building roads, highways, and basic infrastructure. It’s a classic development narrative. The geopolitical events surrounding tariffs and the current energy shock have hurt India more than many other countries. India has very limited energy reserves — estimated at roughly two months — which makes it highly vulnerable. Its stock market was down about 4% last year and is down roughly 9% this year. The primary driver has been foreign investor selling. Foreign investors play a major role in Indian markets, and outflows in the first four months of this year have already surpassed all of 2025. What’s interesting, though, is the divergence between large-cap and small-cap stocks. Large-cap Indian companies tend to be dominated by foreign investors, while small caps are held more heavily by domestic investors. Indian small caps are actually up nearly 10% year to date, and April was one of their strongest months in more than a decade. Small caps are outperforming large caps by roughly 2,000 basis points because the investor base is completely different.
14:07.086 — Michael Zeuner: It really is a tale of multiple cities driven by many different factors. For long-term investors, how should they navigate periods where markets are moving in very different directions?
14:33.038 — Sam Sudame: This is where diversification becomes incredibly valuable. Different countries rise and fall for different reasons. A diversified equity portfolio allows investors to ride through those cycles more smoothly, both over the long term and even in the short run.
14:54.702 — Michael Zeuner: So no big bets, multiple sources of exposure, avoid concentrations, and things should work out just fine. Thank you, Sam. I appreciate your insight and look forward to talking again soon.
15:08.418 — Sam Sudame: Thank you, Michael.
