US election 2024: Emerging markets

What the US election means for emerging markets investors

A shift in gear or more of the same? Portfolio managers Archie Hart and Thys Louw consider the implications of Trump’s election victory for emerging markets and discuss what it means for investors.

Nov 7, 2024

5 minutes

Thys Louw
Archie Hart
Jen Ford
Emerging markets | Q&A with Thys Louw and Archie Hart

Portfolio managers Thys Louw and Archie Hart speak to portfolio specialist Jen Ford about what the US election result means for emerging markets investors.

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Q How have emerging markets reacted to Trump’s victory? 

Before the election, the macroeconomic backdrop for fixed income markets was very constructive, with a combination of stabilising growth, slowing inflation and loosening monetary policy in many of the world’s economies. The short-term reaction to the election result has seen market participants price key themes/outcomes related to Trump’s expected policy path:

  • An anticipated rise in (or return of) inflation, led by the US economy, is evidenced by rising yields in the US Treasury market – relating to higher fiscal spending and deregulation – and the US dollar strengthening. This has boosted high-yielding assets (pushing down credit spreads in riskier parts of the bond market).
  • Concerns around trade tariffs have caused some European and Asian markets – primarily manufacturing-heavy economies – to underperform.
  • An expected shift in gear on the geopolitical front has boosted Ukrainian and Israeli bond prices, reflecting the view that Trump will try to expedite peace deals with the respective regimes.

In the equity market, beyond the US – where market participants have focused squarely on Trump’s perceived pro-business agenda – the reaction has been quite muted. Even in China and Mexico – the economies set to be impacted the most by Trump’s proposed tariff increases – equity market moves have been relatively small, underlining the dominance of domestic drivers in these markets. For context, Mexico’s stock market decline in recent months reflects concerns around the direction of domestic policy under the new administration; meanwhile, China’s economic stimulus policy has been the key focus of market participants, with muted confidence among the country’s business and consumer sectors the key culprit for lacklustre growth rates.

Q What are the potential implications of more stringent trade tariffs?

Markets seem to be in wait-and-see mode here. While Trump’s rhetoric on tariffs has been tough and alarming, what happens in practice is yet to be seen, making it difficult to gauge – and price – the size and scope of eventual tariffs. In the meantime, as noted above, China’s domestic policy direction is the primary focus of market participants, with important meetings in the coming days being closely watched for signs of a more supportive policy shift.

That the market reaction has not been stronger makes sense in the context of Trump’s previous term in office: what he threatened differed significantly from his eventual policy; there was much horse trading, resulting in exemptions. This, coupled with the heavy collateral damage proposed tariffs could inflict on US companies such as Apple and Walmart, creates an uncertain outlook for US trade policy.

Crucially for emerging markets investors, Biden’s administration upheld many of Trump’s trade policies, meaning markets and economies have had eight years to adjust to a more protectionist US regime. The direction of travel has not changed, but it will be key to monitor whether there is an acceleration.

Q Which markets will be impacted the most?

Reflecting again on Mexico and China, the outlook is more nuanced than some headlines might suggest.

First to Mexico: expect plenty of noise ahead of the 2026 renewal of the United States-Mexico-Canada Agreement (USMCA) trade pact, with immigration likely to feature as a bargaining chip. Much is at stake for Mexico – 85% of its exports go to the US. But note that it was under the previous Trump administration that this pact was renewed last time around.

As for China, given the policy continuity mentioned earlier, for the past eight years China has been positioning for increased US protectionism. The most recent move was the deal signed with India to facilitate an increase in Chinese exports to the country and a rise of Chinese investment in India.

Elsewhere, for Central and Eastern Europe it will be important to see what tariff exemptions, if any, emerge from Trump’s eventual trade policy. However, here too, almost a decade of US protectionism and increased polarisation of the global economy is not a new theme, and global supply chains have already adjusted.

In that vein, and crucially for active investors, even if trade is squeezed in some emerging markets, others will benefit. The nearshoring and friendshoring trend is already boosting various emerging markets and companies operating within them, such as in South-East Asia (namely Vietnam, Malaysia and Thailand, Indonesia, the Philippines). Additionally, Taiwan and South Korea are seeing some reshoring of technology, while parts of Eastern Europe are benefiting from nearshoring.

Q What are the investment implications of a stronger dollar?

The market’s short-term reaction to Trump’s ‘America first’ policy is seen via the continuing strength of the US dollar. A strong US dollar is not helpful for emerging market assets, but it is something investors have been dealing with for a decade now.

Longer term, the path of the US dollar is less certain, not least because of the many contradictions in Trump’s policy agenda and parts of his administration that are actively calling for a weaker dollar to boost the domestic manufacturing sector.

Q How are you positioning portfolios?

In fixed income portfolios, the short-term outlook – reflecting growth-friendly policy in the US and the potential for more expansionary policy in China – favours higher carry and higher yielding markets. Positioning in FX markets should be selective given the uneven impact of tariffs and uncertainty around these. In rates markets, there are still plenty of economies where real (inflation-adjusted) interest rates are exceptionally high, creating a positive outlook for bond prices in these markets into 2025.

In equity portfolios, it is worth noting that tech companies today account for more than a third of the market. These companies – mostly in Asia – are making equipment that cannot be sourced from elsewhere (e.g., Nvidia has no other option than to buy its chips from TSMC); importers of these goods will simply have to pay higher prices if tariffs go ahead. Tariffs do not pose an existential threat.

In Mexico, we are favouring companies that are set to benefit from a higher US dollar (e.g., miners) and defensive firms such as consumer staples businesses. Also in the short term, China’s domestic policy moves are key to watch. In terms of longer-term opportunities, there are plenty of countries that will benefit from repositioning of supply chains, e.g., Malaysia’s economy is already benefiting and growing at 5%.

Trump’s rhetoric in the coming months will create plenty of volatility in markets and investors will need to be nimble. But to reiterate a point made earlier, while the scale of tariffs is unknown, the direction of policy remains the same.


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This is not a buy, sell or hold recommendation for any particular security.

General risks. All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.

Specific risks. Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.

Authored by

Thys Louw
Portfolio Manager
Archie Hart
Portfolio Manager
Jen Ford
Portfolio Specialist

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