The Case For Emerging Markets And Chinese Equities

2025-04-30 04:10:00 ET

Summary

• I continue to expect significant pressure on the USD and USD assets as a result of the trade wars and the broader trajectory of US policy.
• I believe that global growth may inevitably shift towards Asia and Europe over the next few years as the US moves into recession.
• After recently spending two weeks in China, I believe that cyclical reflation may occur with greater velocity in 2025.

By Justin Leverenz, Chief Investment Officer, Developing Markets Equities

We live in revolutionary times. Growth, wealth, and the ability to project power are all derivative benefits of the US dollar as the global reserve currency, which also carries with it the responsibility to benevolently govern the post-cold war international order. Rather, we are witnessing an abrupt — and chaotic — upending of the institutions and norms of that order. Unfortunately, trust is broken, and capital investments — particularly in the US — will likely be curtailed until there’s greater clarity on the endgame regarding taxes, tariffs, currencies, and geopolitics. Further, the most important bilateral relationship in the world between Washington and Beijing has perhaps never been as adverse.

Investors face some key questions:

• Stock markets . Will logic prevail? And when is it time to buy stocks?
• Capital controls . Do we face outsized risks beyond contemplation? Will trade wars morph into capital restrictions all around?
• Escape valves . Will the checks and balances built into the US political system moderate escalation beyond certain thresholds?
• China . Will the antagonisms with China worsen? Are Chinese stocks presenting an incredible buying opportunity?

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