A rally in Chinese stocks since the start of the year is prompting investors to predict that mainland shares will outperform their American peers in a sign that attractive valuations are trumping the idea of American exceptionalism.
Last week, the S&P 500 slipped into correction territory for the first time since 2023. In contrast, the MSCI China index has gained 19% since the start of the year, to Mar. 9, according to Goldman Sachs, marking its best start to a year in history.
The contrasting fortunes mark a swift turnaround from just a few months ago when many investors believed the U.S. was uniquely positioned to weather economic and political storms buffeting other countries. Chinese stocks were also languishing due to regulatory worries and concerns over the health of the Chinese economy.
A lot has changed since.
U.S. President Donald Trump’s tariffs policy has fanned speculation of an economic slowdown in the world’s largest economy.
Meanwhile, in China, optimism around the country’s artificial intelligence capabilities has intensified since the introduction of DeepSeek’s R1 model earlier this year.
“The U.S. has had a good period, and that’s coming to an end because Trump’s policies are very anti-economy. China has had a very bad period, but it looks as if it’s starting to recover,” Richard Harris, CEO of Port Shelter Investment Management, told CNBC.
“I call it the great pivot. Obviously, over the last 5 to 7 years, U.S. markets have been dominant. The Magnificent Seven have gone to the moon … [But] it seems difficult to see that there’s much more to go,” Harris said.
The tech-heavy Nasdaq Composite is also in correction territory, dragged by a selloff in Magnificent Seven shares, driven by recession concerns and trade war fears. The Magnificent Seven comprises Alphabet
