We now all know that the United States lost its final ‘AAA’ rating after Moody’s downgraded the sovereign rating to ‘Aa1.’ The move has been “on the verge” with warnings for several years. And while the news took the 30-year Treasury back over the 5% magic level, stocks were down less than 1% on Monday morning. Tactical investors are going to wonder where they should move their assets now, or perhaps IF they should move their assets around.

JPMorgan’s take is in — move more assets to emerging markets. JPMorgan has upgraded its rating on emerging market stocks to “Overweight” from “Neutral.”

This is a classic tactical investment rotation strategy. Whether it works (or if it is already too late after such strong gains) remains to be seen. A look at each nation’s top ETF strategy will also show how much each is up versus the S&P 500 (see below).

JPMorgan’s strategists cited an easing of trade tensions between the U.S. and China and a softer U.S. dollar in its upgrade rationale. The de-escalation between China was shown to remove a significant headwind, and JPMorgan expects that the U.S. dollar will continue to weaken in the second half of 2025.

Tactical Bulls would point out that some of the rotation didn’t wait for large broker firms and investment banks to tell them ahead of time. The dollar index was down about 7.5% so far in 2025, while the MSCI Emerging Markets Index was up 9% year-to-date. The S&P 500 Index was last seen up just 1% year-to-date, but that is after a 23% rally from its 52-week lows that were seen in early April when trade tensions were pointing to an all-out trade war with the United States and many nations beyond just China.

As for emerging markets versus developed nations, there can always be fast growth from the emerging markets if the economy is on their side. And overall valuations are closer to 12.5-times forward earnings for emerging markets versus about 19-times forward earnings for developed nations.

The firm is not suggesting that this is the end of “trade noise” that has roiled markets earlier in the year. What it does believe is that the worst is now likely in the rearview mirror.

JPMorgan strong gains ahead for China, particularly in Chinese technology stocks. The iShares China Large-Cap ETF (NYSEArca: FXI) was last seen up 17% year-to-date. JPMorgan also remains positive on the following nations, followed by moves in their top ETFs for representation and to compare to the S&P 500:

• Brazil — iShares MSCI Brazil ETF (NYSEArca: EWZ) was last seen up 25% year-to-date.
• Chile — iShares MSCI Chile ETF (NYSEArca: ECH) was last seen up 31% year-to-date.
• Greece — Global X MSCI Greece ETF (NYSEArca: GREK) was last seen up 36% year-to-date.
• India — iShares MSCI India ETF (NYSEArca: INDA) was last seen up 4% year-to-date.
• Poland — iShares MSCI Poland ETF (NYSEArca: EPOL) was last seen up 45% year-to-date.
• the UAE — iShares MSCI UAE ETF (NYSEArca: UAE) was last seen up 13% year-to-date.

The broadest emerging markets ETF is the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) and it was last seen up 10.5% year-to-date. The one caveat about this ETF and its $17.4 billion in assets under management representing emerging market stocks as a whole is not that its holdings include 800+ emerging market stocks. It’s that nearly half of the market value (47%) is tied up in financials (24.3%) and information technology (23.0%). Another caveat is that this ETF is heavily dominated by China (31.2% weighting) and Asian markets India (18.5%), Taiwan (16.8%) and South Korea (9%).