Despite massive tariff threats from US President Donald Trump, the stock markets of many emerging economies held up well in the first half of the year. Why emerging markets shouldn't be missing from a diversified portfolio. And what role they should play in it.
The really great euphoria for emerging markets had already died down a while ago. And with Donald Trump taking office, the prospects for the near future didn't look particularly good. After all, the US President had already threatened above all China with high tariffs during his election campaign. At times, punitive tariffs of 145 percent applied to imports into the US.
Even so, the stock markets of many emerging economies held up exceptionally well from early January to the end of June. Over this period, Brazil's Bovespa and the Mexican IPC, for instance, were up by around 16 percent, Hong Kong's Hang Seng by 22 percent and South Korea's Kospi by 28 percent. The MSCI Emerging Markets climbed by around 14 percent. The S&P 500 managed „only“ a rise of just under 6 percent, after a catch-up in the second quarter. That catch-up, however, took the US index to new record highs.
Tariffs - a risk for the world economy
The market performance is quite remarkable, because the outlook for the world economy is currently anything but rosy. In its spring forecast in April, the International Monetary Fund (IMF) scaled back its outlook for growth this year from 3.3 percent to 2.8 percent. The reason, above all: US tariff policy.
Even if there were rapprochements between the US and China and an initial de-escalation agreement at the end of June, US President Donald Trump's tariff policy remains erratic and a risk. Because exports are an important growth engine for many emerging economies. The IMF cut its forecast for emerging markets in Asia, for example, by 0.6 percentage points to 4.6 percent. For South America and the Caribbean, the IMF now sees growth of just 2 percent this year, 0.5 percentage points less than back in January.
That the stock markets in many emerging economies are nevertheless developing positively may be linked to the hope that, in the end, things won't turn out so bad on tariffs after all. And to a shaken confidence among investors, who have at least partly shifted capital from the US into other markets. Some even saw, at times, a „great rotation into emerging markets“ on the horizon. Because the emerging economies' stock markets are quite small compared with the US market, even a relatively modest shift of capital gives them a bigger boost. But how long the trend will last is completely uncertain.
Heavyweights China and India
Two countries stand out particularly among the emerging markets. With over 1.4 billion people each, China and India are not only the world's most populous nations. Economically too, both put all other emerging economies in the shade. China is the world's second-largest economy. India could displace Japan from fourth place this year.
In a direct comparison, China's gross domestic product (2024: 18.7 trillion US dollars) still far exceeds India's (3.9 trillion US dollars). But India has been outpacing its neighbour in terms of economic growth for a while now. For this year and next, the IMF expects GDP growth of 6.2 and 6.3 percent respectively in India. The forecast for China, at 4.0 percent in each case, is much more subdued.
On top of that: over the past few years, China has scared off many investors with its authoritarian policies and a property crisis that has been smouldering for a long time. Meanwhile, India, with its young population and a less export-dependent economy, has moved into investors' focus. Which has also led to the Indian stock market receiving a marked boost.
Avoiding speculation
But just like trends in individual shares, the signs for individual regions can quickly turn. Surprises and re-ratings happen again and again. This has already been shown several times this year too. In January, for example, a piece of news from China sent shockwaves through the US tech sector. A new AI bot from the Chinese start-up Deepseek had, at least temporarily, raised doubts about the expensive business models of celebrated US stock market stars. Even if the storm quickly subsided again: China is investing massively in artificial intelligence. Further surprises cannot be ruled out.
If you want to avoid speculation, you should diversify your investment as broadly as possible. quirion's global ETF portfolio is diversified according to scientific criteria. And it also invests in shares from emerging markets. Here, the weightings in the portfolio are not derived from assessments about the future of individual shares or regions. Instead, they come above all from market capitalisation, that is, the value of the freely tradable shares, as well as a few other relevant return factors. At present, quirion's global ETF portfolio comprises around 8,000 shares from over 70 countries.
The investment strategy aims for the long-term average return of the world equity market and is forecast-free. That reduces the danger of backing the wrong horse. And at the same time it increases the likelihood of long-term investment success.
You can also invest in the global ETF portfolio as part of a savings plan, starting from savings instalments of just 25 euros. In this way, investors use the return opportunities of the world's equity markets to build their wealth, without taking unnecessary risks.
More about our ETF savings plan PLUS can be found here.
