JPMorgan has upgraded its outlook on emerging market equities, citing a notable easing of trade tensions between the United States and China. The investment bank now sees improved potential for growth in emerging markets, especially in Asia, as diplomatic and economic signals point toward greater stability in the world’s two largest economies.
In a note to clients released on Monday, JPMorgan analysts said they had moved from a “neutral” to “overweight” stance on emerging market stocks, with a particular emphasis on countries benefiting from improving supply chains, stronger trade flows, and softening geopolitical risk.
“The moderation of U.S.-China trade tensions reduces a key overhang on global risk sentiment,” the note stated. “This paves the way for a re-rating of EM equities, especially those with strong domestic demand and reform momentum.”
The move comes as Washington and Beijing continue to show signs of economic détente following months of tit-for-tat tariffs, export restrictions, and diplomatic sparring. Recent high-level talks have led to agreements on technology cooperation, agricultural trade normalization, and frameworks for dispute resolution—measures that have helped ease investor concerns.
JPMorgan specifically pointed to stronger performance expectations in India, Indonesia, Brazil, and South Korea, citing improving macroeconomic indicators, policy stability, and inflows from global funds seeking yield amid slower growth in developed markets.
Investors have responded positively. The MSCI Emerging Markets Index rose nearly 1.2% following the announcement, and regional stock markets across Asia and Latin America posted gains on the day.
“The risk-reward balance is shifting in favor of EM,” said Karen Ward, JPMorgan’s Chief Market Strategist for EMEA. “We see a broad-based opportunity as valuations remain attractive, currencies stabilize, and central banks in many emerging economies enter easing cycles.”
JPMorgan’s reassessment also noted that a stabilizing dollar, peaking U.S. interest rates, and greater clarity on global trade policies could contribute to a more favorable environment for capital inflows into developing markets. Additionally, inflation is coming under control in several EM countries, allowing their central banks to begin monetary easing—boosting credit and consumer spending.
Analysts, however, cautioned that risks remain. They flagged potential volatility from U.S. fiscal policy debates, lingering effects of past supply chain disruptions, and any unexpected flare-up in geopolitical tensions as factors that could cap upside gains.
Nonetheless, the move signals growing optimism among global investors after nearly two years of cautious positioning toward emerging markets. With Chinese growth stabilizing and U.S. rhetoric softening, the outlook for EM assets is undergoing a meaningful shift.
“This is not a full return to risk-on sentiment, but it’s a clear indication that the worst-case trade war scenarios are off the table for now,” JPMorgan’s report added.
The bank advised investors to focus on sectors tied to consumer demand, infrastructure, green energy, and digital transformation—areas where EM countries are expected to see rapid expansion over the next several years.
With developed markets facing stagnant growth, high debt burdens, and political gridlock, emerging economies—often more dynamic and reform-driven—are increasingly back on the radar of global fund managers.
As the global financial landscape recalibrates, JPMorgan’s bullish stance could encourage broader reallocation of capital into emerging markets, signaling the start of a potential rebound for regions that have long trailed developed market performance.
Source: Reuters
