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TRY THE DOMESTIC TO DILUTE THE TASTE OF TARIFF WORRIES

Brian Belski at BMO Capital Markets sounds bullish on America but the chief investment strategist is specifically keen on stocks of companies that generate a significant portion of their revenue from domestic sources.

U.S. President Donald Trump unveiled his reciprocal tariff plans on Thursday, ordering the Commerce Department and the U.S. Trade Representative's office, to recalculate U.S. tariff rates for each country, product by product.

So Belski, understandably, has tariffs on his mind as he measures investment strategies.

But the strategist also cites recent underperformance of domestic stocks as another incentive.

"While the latter worked relatively well during the decade following the financial crisis, it has seemingly fallen

out of favor since the pandemic with stocks having a significant amount of foreign revenue far outpacing the returns of their domestic-focused counterparts," the strategist wrote.

And now, with tariff uncertainty back in the equation, "more domestic focused stocks are positioned to reverse this multi-year relative performance slide since in theory they are more shielded from the tariff threat but also considering that global macro data continues to favor the US," he said.

For his comparison, Belski divided the S&P 500 into two

buckets by separating stocks based on their five-year average percentage of foreign-to-total revenue with 50% being the threshold that he used. With this he found that more domestic-focused stocks had been pushed to their lowest level in more than three decades relative to foreign-focused stocks.

Here is the BMO graphic representing his analysis, which also draws on Factset data:

(Sinéad Carew)

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