Quick overview

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After several years of lagging behind developed markets, a major Wall Street bank believes emerging markets (EM) may once again attract significant capital inflows.

JPMorgan has upgraded its rating on EM equities to overweight, citing a combination of improving macroeconomic conditions, supportive policy shifts, and attractive valuations. This marks a notable change following four years of relative underperformance, during which EM stocks trailed developed markets (DM) by about 40%.

“The risk-reward balance for EM is improving,” wrote JPMorgan strategists.

This upgrade follows a previous move from underweight to neutral in Q1 and is largely driven by easing trade tensions.

The United States recently lowered proposed tariffs on Chinese imports from 145% to 41%.

“While this likely doesn’t mark the end of trade tensions, we believe the worst is behind us,” the strategists noted.

A weaker U.S. dollar (USD) is also seen as a tailwind for EM equities, which have historically moved inversely to the dollar. JPMorgan’s FX team expects further weakening in the second half of the year as global growth outside the U.S. improves.

“They anticipate the USD will depreciate against major currencies in the coming quarters due to stronger growth trends abroad,” the note added.

“They also expect EM currencies to stabilize against the dollar and believe a decline in recession risks could even allow EM currencies to outperform.”

Which Countries Could Benefit Most, According to JPMorgan?

Within the EM space, JPMorgan highlights specific country-level opportunities, particularly in India, Brazil, the Philippines, Chile, the UAE, Greece, and Poland.

India is described as a “safe haven amid Trade War 2.0,” supported by strong economic momentum and policy backing.

Brazil is seen benefiting from a weaker USD and a rebound in China, while the Philippines stands out for its domestic focus and recent monetary policy easing.

JPMorgan also reiterated its positive view on Chinese tech stocks and maintained an overweight position in the mining sector. Despite recent volatility, the bank believes Chinese equities may benefit from political support, improved liquidity, and updated GDP forecasts.