Flashback: Fund flows to BRIICS equities after the 2016 election

With Donald Trump threatening to slap tariffs on the rest of the world (and especially China) when he becomes US president in 2025, what will happen to confidence in emerging equity markets? In search of lessons, we can explore international asset allocators' reaction to his surprise 2016 win thanks to our partnership with EPFR, our fellow ISI Markets company.

We charted fund flows into the BRIICS economies -- Brazil, Russia, India, Indonesia, China and South Africa -- as measured by a percentage of assets under management (AUM).

It's notable that equity flows immediately dipped for most of the BRIICS. The major exception was Russia: the so-called "Trump Trade" of the era saw investors pile into that market on optimism that the new president would wind down sanctions and thaw tensions with Moscow. (This sentiment faded as 2017 wore on and Republican senators pressed Trump to keep sanctions in place.)

Immediately before and after Trump's inauguration, net flows to most of the BRIICS improved, likely due to increased policy clarity.

The case of India is complicated by another surprise: on the same day as the US election, Narendra Modi's government abruptly demonetized 86 percent of its currency in circulation. This led to significant economic disruption, cash shortages and a swoon by local stock markets.

In our second chart, we turn to developed markets: the effect of Trump's victory was much less pronounced. European countries' somewhat negative flows persisted amid Brexit and lingering fallout from the eurozone debt crisis. Japan and Australia were relative outperformers through 2016-17.

Our third chart, however, shows the stark contrast that took place Stateside: US equities saw an immediate inflow, whether due to optimism about Trump's domestic economic policies or a flight to safety. As the S&P 500 soars, the same trend is likely also taking place in 2024.

Differences between 2016 and 2024 include the monetary environment -- Janet Yellen's Federal Reserve was tightening policy when Trump was first elected, while Jerome Powell is in easing mode today.

Explore more data and visuals:

EPFR Fund Flows and Asset Allocation

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