# Market Update - US

_US markets are holding up better than expected post-tariffs, but pockets like semiconductors, renewables, and biotech remain deeply undervalued._

Neil Woodford · 9 May 2025 · 2 min read

![Market Update - US](https://cdn.sanity.io/images/v3acfbvo/production/e0d811c17ccaa44e6b326238801101420e03577a-5184x3456.jpg?w=1600&fit=max&auto=format)

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The US equity market has once again confounded the consensus view that the Trump tariffs announced on April 2nd would lead to a significant and sustained correction, which would later be reflected in the economy sliding into recession. I suggested at the time that the market’s initial reaction was completely overblown and continue to believe that the US economy will deliver reasonably good growth in 2025 and 2026, albeit at a slower pace than in 2024.

Having said that, I do not underestimate the near-term disruption that this chaotic month has created in US boardrooms. Clearly, for some sectors, it has been a very difficult period, but again, as I wrote at the time, the initial announcement was likely to represent the worst possible outcome and that through a process of negotiation, the initial tariffs would be ameliorated significantly. It is also clear that Trump has also blinked on numerous occasions in the last four weeks as the potential impact of his initial proposals was revealed in numerous engagements with leading figures from corporate America.

In previous blogs and updates, I have written about how different companies, sometimes in the same sector, have responded in different and unusual ways to the original announcement. Whilst the dust continues to settle in this 90 day window in which many deals are likely to be done, the latest announcement which reveals that China and the US will be sitting down to talk to each other in Switzerland this weekend, highlights once again that the simplistic and alarmist initial reaction to the announcement was yet another great example of how markets can get things very wrong from time to time.

I still believe that the US stock market is overvalued and will continue to underperform other, much cheaper global equity markets, potentially for an extended period. Within the US market, however, there are pockets of extreme undervaluation in some notable sectors, including semiconductors, healthcare, and renewable energy. In general, all of these have performed poorly in recent weeks. This, I believe, has created an even bigger anomaly in these unloved and underappreciated areas of the US equity market.

Tariff fears have been the principal concern in the semiconductor sector. Trump’s energy agenda has undermined confidence in the renewable energy industry. Most recently, the appointment of a new head of the FDA has undermined what little confidence remained in the US biotech sector, which has had an especially torrid 2025 following more than two years of relative underperformance.

There have been numerous Q1 results from businesses in these sectors that I've been watching. Some have been very good and have beaten analysts’ expectations, others have been less impressive, but all have been met with relative indifference at best, and in some cases, outright hostility from the market. I believe this reflects heightened anxiety in the US investor base that is still grappling with the volatility of the stock market and the unpredictability of the frequent tariff announcements. In time, I expect valuation rationality to return to these three sectors as the market moves on from the shock of the Liberation Day, but in particular, the stock-specific attractions of the businesses I've written about and their extreme undervaluation should come, once again, to the fore.