J.P.Morgan has upgraded emerging-market equities to “overweight” from “neutral,” arguing that easing U.S.–China trade frictions and a weaker dollar remove two major hurdles facing developing-world stocks.
Tariff rollback boosts sentiment
Washington and Beijing last week agreed a 90-day tariff reduction, slicing U.S. duties on Chinese imports to 30 % from 145 % and Chinese levies on U.S. goods to 10 % from 125 %.
“De-escalation on US-China trade front reduces one significant headwind for EM equities,” analysts wrote, predicting further relief as the greenback softens in the year’s second half.
Market leaders and laggards
The bank remains “positive” on India, Brazil, the Philippines, Chile, the UAE, Greece and Poland, while seeing opportunity in beaten-down Chinese technology counters.
“While this is unlikely to be the end of trade noise, we think that the worst of it is likely behind us,” the note said.
The MSCI emerging-markets index has climbed 9 % in 2025, aided by waning confidence in U.S. assets after a string of policy surprises.
Valuation gap widens
Despite the rally, EM stocks still trade at just 12.4 times forward earnings, far below the 19.1 multiple commanded by developed-market peers.
EM equities have underperformed rich-world benchmarks by 40 % on a cumulative basis since 2021, leaving scope for catch-up should macro headwinds abate.
Dollar weakness—reflected in a 7.5 % slide in the DXY index this year—provides an additional tailwind by easing debt-service burdens for EM corporates and governments.
Risks linger
JPMorgan cautions that elections, commodity swings and lingering protectionist rhetoric could yet unsettle the outlook, but argues the reward-to-risk balance now skews in favour of selective exposure.
Portfolio managers are advised to focus on domestic demand stories and structural reform plays rather than purely export-driven names vulnerable to renewed tariff shocks.