Which stockmarkets have benefited from the chaos on Wall Street?

SINCE DONALD TRUMP’S inauguration on January 20th the S&P 500 index of America’s biggest firms has fallen by more than 9%; the tech-heavy Nasdaq has dropped by almost 15%. The tech giants that powered Wall Street’s rise—Alphabet, Apple, Nvidia and the rest of the so-called “Magnificent Seven”—have lost a quarter of their value. Investors have scrambled into havens such as gold, or sought to diversify by buying shares listed elsewhere (see chart 1).

It is hard to assess in real time how much money is flowing directly out of America and into other markets. One gauge is exchange-traded funds (ETFs)—pooled portfolios of assets that trade like shares. They offer a fast, liquid way for investors to move capital, and are thus a good indicator of sentiment. In March investors pulled almost $1bn from American equity ETFs and poured nearly $9bn into European ones, according to HANetf, a data provider.

The best-performing markets share two strengths: low exposure to American tariffs and strong domestic growth. A ranking by Oxford Economics, a consultancy, assesses countries’ stockmarket performances alongside their tariff vulnerability (measured by their reliance on American revenue, the size of their manufacturing sectors and their sensitivity to global industrial cycles).

By this measure, the top performing index in Europe is Spain’s. The IBEX 35 index is up almost 13% since Mr Trump’s inauguration. The economy is growing briskly, fuelled by tourism and a surge in migration. Spain is less vulnerable to tariffs than other European countries, such as Italy or Germany, and its stockmarket leans heavily on utilities and energy—industries that tend to hold up well during downturns. Other smaller markets are also outperforming: Poland’s benchmark is up by 21%, helped by rapid economic growth and limited exposure to American tariffs. Deutsche Bank reckons that Mr Trump’s duties will affect Polish exports worth only about 1% of the country’s GDP, half the European Union average.

There have been some surprises in global markets. Mexico, for example, is highly exposed to Mr Trump’s trade wars, but its stockmarket has outperformed. It has been helped by Mexico’s exemption from new “reciprocal” tariffs and by the makeup of its main index, which is dominated by retailers and banks that are mostly shielded from global trade shocks. Germany is also an outlier. According to Oxford Economics, Germany is the second-most vulnerable country to Mr Trump’s tariffs, behind Taiwan. And yet its benchmark index, the DAX, is up by 6% since the inauguration. Hong Kong’s Hang Seng index has also rallied, despite tensions between Mr Trump and mainland China.

Is this a good time to invest in these markets? Europe’s long-term returns have historically lagged behind America’s because of slower economic growth, political fragmentation and a smaller tech sector. Analysts warn that though some countries are benefiting from temporary tailwinds, structural challenges remain. But for now investors are chasing resilience, not dazzling returns.■