As we’ve flagged in recent weeks, an end to the conflict in the Middle East should see many foreign stock markets outperform the US. Lower oil prices reduce global inflationary pressures, give central banks room to ease policy, and tend to benefit oil-importing economies, particularly in emerging markets, more than the US, which exports oil. Last week’s tape delivered exactly that, with Asia leading the Go Global trade higher.
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(1) Stay Home vs Go Global. EM ex-China (EMXC) dominated the week as the peace dividend filtered through to the regional names most exposed to lower energy prices and the AI capex cycle. The semiconductor trade continues to lead, which is why Korea and Taiwan sit at the top of this week's leaderboard. Korea led with an 11.0% gain for the week, with Taiwan, EM ex-China, the EM Index, Japan, and EM Asia all up between 3.7% and 7.2% (chart). External to Asia, moves were modest in either direction. The US SPY rose 0.7%, while China was the worst in the panel at -5.6%.
The US MSCI outperformed the Developed World Ex-US MSCI from 2010 to 2024. Since then, they have performed about the same (chart).
