Investors Pivot to Emerging Markets as Tariff Fears Shake Wall Street

Wall Street Chaos: Why Investors Shift to Emerging Markets

Investors shift emerging markets to escape escalating tariff risks, U.S. policy shocks, and growing concerns in Europe. As Wall Street posts its third straight monthly decline, global portfolios are pivoting to Latin American currencies and gold mining stocks—now viewed as safer alternatives amid global trade disruption.

Amid a wave of U.S. policy shocks and fears of European export slowdowns, investors are shifting strategies. As Wall Street suffers from erratic domestic policy and the dollar weakens, attention is turning toward gold mining stocks, Latin American currencies, and other tariff-resistant markets.

President Donald Trump’s April 2 remarks triggered a sharp drop in U.S. stocks (.SPX) and the dollar. Initially, investors sought safety in European equities—but the euro’s rapid 10% climb is now choking exports, diminishing those gains.

Emerging Markets: The Unexpected Safe Haven?

Traditional safe havens like U.S. Treasuries are under pressure. In response, many investors are reallocating to alternative markets and credit instruments.

“We expect the riskiness or volatility of emerging market assets and developed market assets to converge,” said Shaniel Ramjee, co-head of multi-asset at Pictet Asset Management.

Ramjee revealed that he recently bought Brazilian local debt and shares in gold mining companies in Australia and Canada. He believes that investors shift emerging markets now because they offer stronger potential than Europe.

Mike Goosay from Principal Asset Management shares this sentiment. He sees promising opportunities in securitized debt, private credit, and emerging market bonds due to their strong risk-reward profiles.

JPMorgan Survey: No Clear Market Favorite

A recent JPMorgan survey at the IMF/World Bank meetings found investors divided. One in four respondents preferred to hold cash. Yet emerging markets came in as the next top choice—despite their historical vulnerability during U.S. downturns.

Meanwhile, Wall Street (.SPX) has fallen for three straight months. European equities (.STOXX) are also stalling due to the surging euro. That’s pushing many toward niche markets previously seen as higher risk.

Latin America Leads as Investors Shift Emerging Markets Focus

April brought a nearly 14% rise in Mexican stocks (.dMIMX00000PUS), rebounding after early declines from reciprocal tariffs. A Latin American currency index (.MILA00000CUS) rose almost 3% in April, pushing its year-to-date gain to 12%.

Fidelity International’s Ian Samson expects high volatility to continue in U.S. markets. Meanwhile, Europe’s growth prospects are dimming, and valuations no longer appear attractive.

Bank of America estimates that European stocks, already down 2% in April, may see another 10% decline in the months ahead.

India has become a standout, according to Samson, thanks to improving trade relations with the U.S., despite ongoing tensions with Pakistan.

In the Gulf region, Saudi stocks (.TASI) climbed 6% in three weeks, buoyed by Trump’s new 10% tariff on oil exports—sparking renewed investor interest.

Gold, Yen, and Bonds: The Overcrowded “Safe” Bets

Traditional safe havens are also showing signs of strain. Japan’s yen surged over 4% this month, gold prices hit a record high of $3,500 per ounce on April 22, and Germany’s 10-year government bond yields sank 195 basis points below U.S. Treasuries.

“The money flow out of the U.S. is simply too large for the safe havens to absorb,” said Simon Edelsten of Goshawk Asset Management.

Morgan Stanley analysts warned that a supply shortage of highly rated non-U.S. bonds could fuel further euro appreciation—adding to export pain.

Michael Siviter from Invesco noted that the stronger euro would intensify the adverse effects of rising tariffs on European growth.

Caution Around Franc and Yen Trades

Sophie Huynh from BNP Paribas described bets on a weaker Swiss franc and a yen rally as “widow-maker” trades. She also voiced caution toward major equity markets, with the exception of China.

Chinese stocks (.CSI000300) have jumped roughly 5% in three weeks, driven by expectations of increased government stimulus.

Despite the turbulence, some analysts believe European defense-related spending—popular until late March—could regain investor attention if U.S. policy changes course.

“My base case is that the U.S. policy mix in place today will shift in a few months,” said Justin Jewell, credit manager at Ninety One.
“And with reduced interest in U.S. assets, Europe could ultimately benefit.”