In the aftermath of President Donald Trump’s tariff announcement on April 2, global markets experienced sharp movements. However, emerging market equities have managed to stage a strong comeback, outpacing many developed markets, especially the US and China.

Recovery in India, Brazil, Mexico, and South Korea

Stock indices in India, Brazil, Mexico, and South Korea have not only recovered from the tariff shock but have emerged among the top performers globally. Their ability to stay clear of the US-China dispute, coupled with government efforts to secure bilateral deals with the US, has boosted investor sentiment.

• The BSE Sensex and NSE Nifty in India, along with Brazil's Bovespa, Mexico’s IPC, and South Korea’s KOSPI, have all recouped losses and are witnessing renewed investor interest.

• This trend signals a strategic shift in investment preference away from volatile trade zones to regions seen as more stable and proactive.

Struggles for Chinese and US Markets

In contrast, Chinese and Hong Kong markets have faltered due to ongoing trade uncertainties and escalating geopolitical tensions. The Hang Seng China Enterprises Index has dropped 5% since April 2, cutting its year-to-date gains to 11%. Similarly, US markets have been volatile, with the S&P 500 yet to fully recover, despite a recent rally.

• While the S&P 500 has rebounded 12% from its April low, underwhelming earnings from Apple and Amazon could dampen momentum.

• Investors remain cautious as no clear resolution between Washington and Beijing appears imminent.

Safe-Haven Currencies Gain Ground

In currency markets, Trump's aggressive policies have pushed investors toward safe-haven assets.

• The Swiss franc has appreciated over 6% versus the US dollar since April 2.

• The euro has also strengthened, supported by expectations of increased military spending by the European Union, following concerns about US defense commitments to NATO.

These moves have indirectly benefited Central and Eastern European currencies, improving broader emerging-market currency sentiment.

New World Order and Strategic Investment Shifts

Market participants are increasingly betting on a new global order where non-US equities gain prominence.

• The MSCI All Country World Index excluding the US has climbed more than 9% in 2025, while US equities remain in the red.

• Michael O’Rourke, chief market strategist at JonesTrading, believes that emerging markets stand to benefit from the US–China decoupling, particularly if trade agreements are struck independently with the Trump administration.

This view is shared by other asset managers, who are rotating funds into emerging markets in anticipation of deals and de-escalation.

High Hopes for Quick Bilateral Deals

Countries like Japan, India, and South Korea are actively engaging with the US to strike initial trade deals that could provide them a head start.

• Investors are flocking to these markets, expecting superior returns once the deals are formalized.

• The optimism stems from the relative policy certainty and diplomatic agility of these nations compared to China.

China and Hong Kong Lose Momentum Post AI Rally

China’s markets had earlier rallied on AI-fueled optimism, but the momentum has now dissipated due to the lack of clarity in US-China trade talks.

• With Beijing and Washington at an impasse, investor anxiety has crept back, causing capital outflows and market underperformance.

• China has expressed willingness to engage but demands “sincerity” from the US, which adds to the ambiguity.

Portfolio Managers Reallocate Global Exposure

As traditional US equity strength fades, portfolio managers are reshuffling allocations:

• Jeff Wilson, from Jensen Investment Management, highlighted that while US-China negotiations may drag on, other global markets present a clearer path to resolution.

• Josh Kutin, from Columbia Threadneedle Investments, maintains an overweight position in US and emerging markets, suggesting long-term structural confidence despite current turbulence.

Conclusion: A Pivot in Global Market Sentiment

The article paints a clear picture of how Trump’s tariff strategy has reshaped global investment flows. While US and Chinese markets grapple with prolonged uncertainty, emerging economies with agile diplomatic and trade policies are increasingly viewed as attractive investment destinations.

Investors are keenly watching the next moves from Washington and Beijing, but until a breakthrough occurs, expect emerging markets to continue drawing attention, especially as they offer higher growth potential with less geopolitical baggage.

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