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U.S.-listed funds tracking global stocks largely pulled back in Wednesday’s session as investors considered Donald Trump’s victory harmful to international equities.
Closely followed exchange-traded funds from iShares tracking South Korea, Mexico, Hong Kong, Japan, Taiwan and Chile all slid in Wednesday trading. That comes despite major U.S. indexes soaring to record highs.
Those idiosyncratic pullbacks come as traders ready for the President-elect Trump’s proposed policies for taxing imports. He has floated a tariff of up to 20% on all goods coming into the U.S., with an especially high 60% levy on those coming from China specifically.
This policy was unpopular among voters, according to NBC News polling. But it appeared inconsequential in the race, despite the economy more broadly being a main issue for Americans heading to the polls.
“While the investing landscape remains favorable in the U.S., international markets are very exposed to tariff policy, ” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “That uncertainty could limit near-term upside in global stocks.”
These moves reflect the divergence between U.S. and international markets as investors around the globe take in America’s election results.
While the Dow Jones Industrial Average headed for its best day in nearly two years, European markets largely struggled on Wednesday as it become clear that Trump would prevail. In the U.S. market, the iShares Core MSCI Europe ETF (IEUR) slid around 2.5%.
Asia-Pacific markets were more mixed, with Japan’s Nikkei 225 bucking the downtrend. Still, the U.S.-listed iShares MSCI China ETF (MCHI) shed more than 2% on Wednesday.
However, the Global X MSCI Argentina ETF (ARGT) climbed more than 2% and touched a new 52-week high, a rare bright spot among international-focused funds. The South American country last year elected libertarian Javier Milei, who was compared widely to Trump, as president.
The ICE U.S. Dollar Index, which tracks to U.S. greenback against a basket of international currencies, reached its highest level since July. LPL Financial chief technical strategist Adam Turnquist noted that the dollar’s rally comes as inflation expectations rose following Trump’s victory.
Turnquist said continued strength in the American currency can hurt international stocks, particularly emerging markets. These markets have underperformed U.S. counterparts in recent years. Indeed, the iShares MSCI Emerging Markets ETF (EEM) slid more than 1% on Wednesday.
— CNBC’s Sarah Min, Jesse Pound and Hakyung Kim contributed to this report.