Michael Hartnett, a strategist at Bank of America known as “Wall Street’s most accurate strategist,” has repeatedly emphasized in recent times that as “American exceptionalism” gradually unravels and the global growth center shifts from the US to broader markets, emerging markets are expected to consistently outperform the US, ushering in a new bull market cycle. This view is being validated by the market: following Trump’s proposal of alternative tariff plans, the MSCI Emerging Markets Currency Index maintained its upward trend on Friday, fully recovering losses incurred during the week. The iShares MSCI Emerging Markets ETF, managed by the world’s largest asset manager BlackRock with a size of $28 billion, achieved a rare “ten consecutive days of gains,” with trading volume 36% above its 20-day average, surging to an all-time high.
“This is a slightly positive signal for emerging market forex, primarily because it highlights the enormous uncertainty in US government policy,” said Alvaro Vivanco, emerging markets macro strategist at Wells Fargo. “This drives the trend towards diversification.” Although Trump stated after the ruling that he would impose a 10% tariff globally under Section 122 of the Trade Act of 1974, it remains unclear whether tariffs already collected need to be refunded. Market concerns over a potential deterioration in US fiscal health have led to a significant rise in long-term Treasury yields, with traders generally reacting negatively to the risk of expanding budget deficits.
Dan Pan, an economist at Standard Chartered Bank in New York, pointed out that the 10% tariff benchmark could be significantly lower than previously higher reciprocal tariff rates. On the same day, latest data showed US Q4 GDP growth was much lower than expected, while the Fed’s preferred core inflation metric rose more than anticipated. These conflicting data points have traders paying even closer attention to the scale and timing of the Fed’s next moves.
With the Supreme Court ruling acting as the latest catalyst, the benchmark index for emerging market stocks rose for a second week, extending the strong rebound driven by companies related to the AI computing power supply chain. “The fundamental drivers for emerging market stock indices will largely remain unchanged,” said Wolf von Rotberg, equity strategist at J. Safra Sarasin. “The record-breaking AI capital expenditures by US hyperscale tech giants strongly support demand for AI computing power infrastructure in 2026, which is also a driver for rising metal prices.”
Michael Hartnett, the BofA strategist who coined the term “Magnificent Seven” stocks, has repeatedly emphasized since the start of this year that the leaders of the next bull market in global equities will be emerging markets and US small-cap stocks. Uncertainty surrounding the Trump administration’s tariff and fiscal policies is driving large investors to withdraw from the US market. Coupled with relatively high valuations in US stocks, high concentration in market capitalization, and a weak dollar benefiting debt repayment in emerging markets, the narrative of “selling the US” is making a comeback, with funds increasingly seeking diversified allocations. Since 2025, the global rotation of funds towards emerging markets has been ongoing. The MSCI Emerging Markets Index has significantly outperformed developed markets in 2025, achieving its strongest relative performance since 2017.
