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The odds of a Donald Trump victory seem to be having a significant impact on emerging market stocks, which are seeing their worst monthly drop since January.
What Happened: The potential implementation of Trump’s proposed tariff plan is causing concern. A recent report has highlighted a four-day consecutive fall in the MSCI Emerging Markets Index. This marks a 3.1% decline this month.
Major companies such as Samsung, Alibaba, Tencent, and Meituan have been hit hardest, accounting for over half of the index’s fall.
According to the report by Markets Insider, with the election just a fortnight away, the market is increasingly factoring in a Trump win.
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On the crypto betting market Polymarket, Trump’s odds of winning rocketed to 66% on Tuesday, the highest since President Joe Biden was still in the running in July. These odds have since slightly decreased to 62%.
Trump’s proposed tariff plan, which suggests raising tariffs on imports from all countries up to 20% and imposing a 60% tariff on imports from China, has ignited investor fears of a detrimental trade war.
Citi bank analysts have noted that the election’s outcome is driving investors to pull away from emerging market shares due to the growing uncertainty.
Other factors such as escalating geopolitical tensions in the Middle East and a bond market sell-off are also pushing investors to steer clear of riskier assets.
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Why It Matters: The potential return of Trump’s aggressive trade policies is causing unease among investors. His proposed tariff plan could lead to a damaging trade war, particularly with China, which would likely have a negative impact on global trade.
This, combined with other factors such as rising geopolitical tensions and a bond market sell-off, is causing investors to shy away from riskier assets, including emerging market stocks.
The uncertainty surrounding the election outcome is only adding to these concerns.
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