Why Markets Suddenly See Opportunity in These Emerging Markets

Key Points

• As the S&P 500 undergoes expanding volatility trends, there are signs of investors starting to shift their exposure into emerging markets.
• The view seems to land on nations that might announce a potential tariff agreement this week. 
• Price action favors momentum and safety in these markets, backed by recent institutional buying as well.

As President Trump's recently announced trade tariffs start to roll out in the global markets, volatility seems to have decided to land on the S&P 500 and other American indexes, sending some capital and investors to seek potential safety elsewhere. For better or for worse, these investors have chosen to go with foreign emerging markets for their hedges and proxy for a safe haven during today’s volatile environment.

Despite the sentiment and choices, there are still plenty of dangers to consider in these markets moving forward. However, these dangers might perhaps be already priced into today’s prices, leaving investors with a much more favorable risk-to-reward ratio and setup. As it will become clear, these are some of the markets that could see a major rebound when and if these tariffs are negotiated and maybe even removed altogether.

To make up for the volatility in the United States, investors can consider the fundamental strengths leading to an attractive upside potential in shares of MercadoLibre Inc. NASDAQ: MELI. However, for those who don’t feel as comfortable with investing in individual stocks, there are two exchange-traded funds (ETFs) covering China in the iShares MSCI China ETF NASDAQ: MCHI, and the Indian markets through the iShares MSCI India ETF BATS: INDA.

There’s a Preference for MercadoLibre Stock Today

There are plenty of ways investors can investigate a stock and educate themselves about its future. However, there’s a much simpler method that can save investors hours of deep and tedious work and still yield just about the same concluding view.

Over the past quarter, shares of MercadoLibre outperformed the broader S&P 500 index by as much as 15%, showing investors worldwide that the market might prefer MercadoLibre as part of the technology sector in Latin American markets. This price action doesn’t just show an outperformance against the S&P 500; there’s a much deeper measure at play.

Comparing MercadoLibre stock to one of its largest peers—and competitors—Amazon.com Inc. NASDAQ: AMZN will yield the same conclusion. MercadoLibre left Amazon stock in the rearview mirror by as much as 21.8%, a massive outperformance that can only be justified in one conclusion.

Since MercadoLibre’s largest consumer base is centered in Latin America, the market’s reward for the name through price action might be forward-looking and indicative of a potential tariff deal being reached with countries like Mexico, Argentina, Brazil, and others.

This would be a welcoming sign for Goldman Sachs analysts, as they reiterated their Buy ratings on MercadoLibre alongside a valuation boost to $2,750 per share. Now, investors can see where the dots are starting to connect in this emerging market opportunity.

Can China Clear Its Name?

Recently, Chinese officials have responded negatively to President Trump’s threats to raise tariffs further if China does not cooperate. The opposing view essentially said that they would fight for as long as it takes to address these economic threats, but they would not make much progress.

However, neighboring countries like Japan and Taiwan have already approached the United States with the spirit of negotiating a fair stance on tariffs, which could be enough footing for investors to regain confidence in Asia’s powerhouse.

More than that, China’s stock market does seem to be a lot cheaper than the United States in terms of stock market value to GDP ratios (also known as the “Buffett” indicator). Knowing this, investors shouldn’t be surprised to see the iShares MSCI China ETF also outperform the S&P 500 by as much as 16% over the quarter, not to mention attract up to $463 million of institutional capital for the latest quarter of 2025, which so far only covers the month of April.

All Bets Are Off in India

The market is pricing in a higher probability of India signing a deal with the United States before China does, which makes sense considering that India exports tons of services to leading European and American companies in sectors like finance and technology.

Complying with the United States' demands for fairness would be a no-brainer, and investors might have already been buying into that, resulting in the iShares MSCI India ETF outperforming the S&P 500 by over 13% during this past month alone.

Just like China’s ETF, some institutional buyers decided to redeploy some capital during the month of April 2025, this time focusing on India’s stock market. The latest quarter shows that up to $2.4 million of institutional capital found its way into this India ETF, giving investors another vote of confidence moving forward on this economic bet.