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1. JPMorgan upgrades emerging market equities to overweight on the back of de-escalation in the U.S.-China trade war and a softer dollar.

“EM historically traded inversely to the dollar (a weak dollar is good for EM) and EM valuations screen attractive, at 12.4x forward P/E, vs DM (developed markets) at 19.1x, and global investor positioning to EM is low, in particular to China.”

“We had a preference for China Tech vs US Tech, and would keep it, despite the recent bounce in Mag-7. While the earnings from major players such as Tencent and Alibaba failed to spark investor optimism, we believe that the recent weakness could be an opportunity, particularly for investors looking to continue diversifying away from the crowded US Tech positions.”

The Chinese internet index has significantly lagged the Nasdaq, as you can see below. (“KWEB” is the Kraneshares China Tech ETF)

2. The “ABUSA” trade.

While the S&P 500 has recovered from April's tariff-induced swoon, a global index that excludes U.S. companies has done much better.

It is up more than 11% in 2025, reflecting how investors have swapped the "Magnificent Seven" for the ABUSA trade: Anywhere But U.S.A.

Yet the foreign index, which is tracked by the iShares MSCI ACWI ex US (ticker ACWX), is still pretty cheap.

The index trades at a forward price/earnings ratio of only 14. That is broadly unchanged from a decade ago. U.S. stocks, on the other hand, are at a steep 21 times. This is because, as analysts cut their earnings growth forecasts for the U.S., they are also upgrading them for foreign companies.

Source: WSJ

3. Chinese interest rate cuts.

China cut benchmark lending rates for the first time since October on Tuesday, to help buffer the economy from the impact of the Sino-U.S. trade war.

Global investment banks are raising their forecasts for China's economic growth this year, after Beijing and Washington agreed to a 90-day pause on tariffs, despite uncertainty around Sino-U.S. trade negotiations.

"We still believe it will be quite challenging for Beijing to achieve its 'around 5%' growth target unless it rolls out a sizable stimulus package," Ting Lu, chief China economist at Nomura, said in a note this week.

4. Strategists stay optimistic on European stocks.

Strategists are suddenly far more optimistic about the outlook for European stocks than the US market, as an improving regional economy attracts investors. The Stoxx 600 Index is expected to end the year around 554 points, according to the average of 20 strategists polled by Bloomberg. That implies a gain of about 1% from Friday’s close.

JPMorgan has one of the highest targets in the survey at 580, while Citigroup predicts a 4% rally to 570 points as analysts dial back some of their pessimism around corporate earnings.

By contrast, both banks expect the S&P 500 to slide through the rest of the year. The difference between JPMorgan’s European and US targets suggests the Stoxx 600 will outperform the US equity benchmark by 25 percentage points in 2025, the most on record, while Citi’s projections would be the best since 2005. “If we have already moved past peak earnings uncertainty, this could set the stage for additional upside and potential multiple re-rating, especially among more beaten-up cyclical sectors,” Citi strategist Beata Manthey says of European stocks. SocGen strategist Roland Kaloyan says he needs to see stronger earnings trends as well as a further reduction in tariff-related risks to bet on a rally in the Stoxx 600. His year-end target of 530 implies a 3.5% drop. “The uncertainty surrounding tariffs further complicates the outlook, as many firms are reluctant to provide clear guidance, indicating that the full impact of these tariffs may not yet be captured in earnings forecasts,” Kaloyan says.

5. Long interest rates keep going up everywhere and the rise in Japanese yields is remarkable.

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