With all eyes on the World Economic Forum in Davos, Switzerland this week, this is an opportune time to discuss the merits of global investing. Especially since the Trump administration just threatened to impose another 10 percent import tariff on the European NATO countries that have publicly aligned themselves with Denmark to dissuade the White House from seizing control of Greenland.

To be sure, the United States has not ceded its position as the world’s biggest stock market. In 2024, the total market cap of all stocks listed on US stock exchanges was roughly $62 trillion. China was a distant second at nearly $12 trillion, followed by Japan ($6.4 trillion), India ($5.3 trillion), and Hong Kong ($5.0 trillion).

In an industry where size matters, most institutional investors prefer the liquidity of large equity markets to mitigate risk. Also, many European countries are dismissed as being too socialistic to merit investment. For those reasons, Europe is often overlooked by investors seeking equity exposure outside of the United States.

European Dominance

Just because a regional stock market is small does not mean that it is not worthy of investment. Over the past five years, the market cap of all stocks trading on US exchanges grew at a compound annual growth rate (CAGR) of 13.1 percent. That is a good result but is only half the 26.2 percent CAGR produced by the top performing country, Argentina.

In fact, the USA ranks 12^th on that list, behind several European nations including Greece (24.2 percent), Spain (18.4 percent), Austria (17.6 percent), Italy (17.1 percent), and Poland (17.2 percent). Bear in mind, that time period includes last year when the White House imposed onerous import tariffs on imported goods from those countries.

Not only did those tariffs not hurt European stocks last year, but they may have helped. The iShares Core MSCI Europe ETF (NYSE: IEUR) produced a total return (share price appreciation plus dividends paid) of 31.7 percent last year compared to the 17.9 percent gain generated by the SPDR S&P 500 ETF (NYSE: SPY).

Trade Partners

The problem with weaponizing import tariffs is they tend to have the opposite their intended effect by the country imposing them in the long run. If the United States suddenly becomes too expensive for European manufacturers to sell to, they will devote marketing and distribution resources to more accommodating areas of the world.

That is already happening. In response to the new import tariffs scheduled to go into effect on February 1, many European nations are openly discussing revising their trade policies to favor trade with each other. Canada, also the object of the Trump administration’s ire, is in on those conversations which is significant since it is a major producer of oil that Europe desperately needs.

If the White House makes good on its threat to start imposing the new tariffs in a couple of weeks, the biggest losers will be American consumers. They will be forced to either pay more for foreign goods or pay less for domestically produced items that may not be what they really want.

Rallying Around Denmark

I believe the biggest potential winners from the new global trade paradigm will be some of the European countries that fared the worst last year. That list includes Denmark, which is likely to get favorable trade treatment from its European allies to help it fend off unwelcome advances from the United States.

Last year, the combined market cap of Denmark’s stock markets grew by 10.6 percent, making it the poorest performing of the European nations. Over the past five years it has grown at a CAGR of 4.9 percent, well below the pace set by its neighbors.

This year, I expect Denmark’s stock market to rally in the face of adversity. If you feel the same way, consider owning shares of the iShares MSCI Denmark ETF (CBOE: EDEN). If the United States ends up purchasing mineral rights from Denmark instead of taking them, the impact on its economy could be huge.