Prospects of a Trump win and huge tariffs spark worst sell-off for emerging market stocks in 10 months

• Emerging market stocks are headed for their worst monthly decline since January.

• This recession comes as Trump’s chances of winning the upcoming US elections increase.

• Trump pledged to significantly raise tariffs on imports to up to 20%, and up to 60% on China.

It’s been a tough month for emerging market stocks as the odds rise that Donald Trump will win the election — and with it, the odds that his proposed tariff plan will actually see the light of day.

Emerging market stocks are headed for their worst monthly decline since January, with the MSCI Emerging Markets Index falling for a fourth day on Thursday, down 3.1% this month.

A select few emerging market stocks took the biggest hits, with Samsung, Alibaba, Tencent and Meituan shares accounting for more than half of the index’s decline.

This decline comes at a time when market prices are increasing the odds of former President Donald Trump winning just two weeks before the election.

On cryptocurrency betting market Polymarket, Trump’s odds of winning rose to 66% on Tuesday, the highest level since President Joe Biden was still in the race in July. The odds are now slightly lower at 62%.

Meanwhile, the polls have become very close, with the latest national poll average compiled by Clear policy Harris appears at 48.7% to Trump’s 48.5%.

Trump proposed increasing tariffs on imports from all countries to up to 20%, and said that imports from China would be Subject to 60% tariff.

Investors’ fears of a devastating trade war are unfounded. In 2018, Trump’s trade war with China severely underperformed US stocks, and strategists say the election result is once again pushing investors away from emerging market stocks as uncertainty grows.

“The US election has become a key driver of uncertainty as risk profiling clearly shifts to a more cautious stance. In our recent interactions with clients, we feel that the appetite of global emerging market investors to increase risk budgets over the coming weeks may have declined significantly,” Citi analysts wrote. In a note last week.

Strategists note that the latest sentiment represents a sharp contrast to last month, when investors were calculating higher odds of a Harris win.

“There has been a significant change in investor sentiment, and investors’ risk budgets are likely to change as a result.”

Other factors, such as rising geopolitical tensions in the Middle East and a sell-off in the bond market, are also pushing investors away from riskier assets. Investors are also expressing disappointment Chinese stimulus measuresany At first he fueled the rally in emerging market stocks last month.

Read the original article on Business insider