Emerging market stocks couldn’t catch a break the past four years. Now, their fortunes may be turning. JPMorgan upgraded emerging markets to overweight from neutral on Monday. Strategist Mislav Matejka cited several reasons for the change, including easing trade tensions and attractive valuations. “De-escalation on U.S.-China trade front reduces one significant headwind for EM equities,” Matejka wrote. “Big picture, the [year-to-date] increase in tariffs is still extremely large in a long term context. … We remain concerned about the impact of tariffs on medium term growth in U.S. and elsewhere; however, last week’s news is clearly positive, especially for China.” China and the U.S. agreed last week to temporarily lower tariffs as part of an attempt to negotiate a broader trade agreement. The news sent the iShares MSCI Emerging Markets ETF (EEM) higher by 3% last week — its fifth weekly advance in six. The strategist also noted that emerging markets are trading at 12 times forward earnings “and at a bigger than typical discount to” developed markets. The EEM exchange-traded fund is up 10.6% so far in 2025, outperforming the S & P 500’s meager 1.3% advance. That’s also better than the European Stoxx 600’s 7.6% gain. EEM’s 2025 advance puts it on pace for its best year since 2020, when it rose 15.2%. This performance also marks a stark contrast from the previous four years, when the EEM lagged both the U.S. and Europe. Check out how the fund, along with the S & P 500 and Stoxx 600, did between 2021 and 2024: Declines during that time for emerging markets were led in part by China, as the country’s economy struggled to recover following strict Covid-related lockdowns. EEM also suffered after President Donald Trump last month announced steep tariffs on dozens of countries. The fund has since recovered, however. Matejka highlighted India and Brazil as potentially notable emerging markets winners. The iShares MSCI India ETF (INDA) is up nearly 4% year to date. EWZ , its Brazilian counterpart, has soared 24%.
