The emerging-markets bandwagon rumbles on, and now China is climbing aboard

The emerging-market equity rally continues, with EEM up 17% in 2025, outperforming developed markets by over 6 percentage points. JPMorgan remains bullish, expecting the rally to broaden into China, a sentiment reinforced by Goldman Sachs' call for a "summer breakout" in Chinese stocks (CN:SHCOMP). This positive outlook is underpinned by recent four-year and year-to-date highs in MSCI China and CSI300 indexes, respectively, and reports of a potential three-month extension of the U.S.-China tariff truce, which could serve as a significant market catalyst.

Analysis

Emerging market equities are exhibiting strong performance in 2025, with the iShares MSCI Emerging Markets ETF (EEM) gaining 17% year-to-date and outperforming developed market peers by more than six percentage points. The focus of this rally is now broadening to include China, which has been a notable laggard. This shift is supported by bullish calls from major financial institutions; JPMorgan has reiterated its positive stance on the asset class, while Goldman Sachs is forecasting a "summer breakout" for Chinese stocks. A potential U.S.-China trade deal is identified by Goldman Sachs as a significant "market-clearing event." This optimistic outlook is further substantiated by recent technical strength, with the MSCI China index reaching a four-year high and the CSI300 index at a year-to-date peak. Near-term momentum is being fueled by reports of an impending three-month extension of the U.S.-China tariff truce, with talks scheduled for Monday in Stockholm.

Key Decisions for Investors

• Investors with existing emerging market exposure may consider increasing their allocation to Chinese equities to participate in the broadening rally, as highlighted by bullish calls from both JPMorgan and Goldman Sachs.
• The upcoming U.S.-China trade talks in Stockholm represent a critical near-term catalyst; a confirmed tariff truce extension would likely validate the bullish thesis and could trigger further inflows into the region.
• Given the market's focus on a potential trade deal, any failure to extend the tariff truce poses a significant risk and could quickly reverse the recent positive sentiment and market gains.