US banking giant Citi has downgraded its stance on US stocks and flipped its preference to China, saying "US exceptionalism is at least pausing", but UBS said this did not feel like a "major rotation" from West to East.
Goldman Sachs also cut its forecast for US economic growth to 1.7% for 2025, down from a previous 2.4% estimate due to the impact of tariffs.
Having previously downgraded its view on global equities from 'overweight' to 'neutral', Citi took this further today.
"We had not fully implemented our view that US exceptionalism is at least pausing, but this has now become clearer," the bank said, downgrading US equities to 'neutral' and upgrading China to 'overweight'.
"In the big picture, US equity outperformance may well return when the AI narrative takes over again, but in the coming months, we expect US growth momentum to undershoot the rest of the world."
UBS, meanwhile, observed that "faltering US confidence" helped emerging markets stage a rally in 2025, with 5% equity, 4.5% local debt, 2.7% credit, 2% median forex returns in the year-to-date.
The Swiss bank said government bond rates have "priced a material dent to US exceptionalism" he says, with the 10y gap between the US Treasury and German Bund having compressed significantly and the euro at its highest against the dollar since October and November.
Measures of emerging market risk appetite and export indicators "disagree" with the recent uptick in the global manufacturing surveys, UBS noted, while credit growth, earnings momentum and tariff risk "don't look consistent with an EM growth renaissance ahead".
"Parts of EM could certainly 'piggyback' further off Europe's improved outlook, but these are not the typical conditions in which we'd expect to see sustained EM outperformance."
However, UBS said EM "could outperform US" over the next two to three months, with China also UBS's preferred 'overweight' among large markets thanks to factors including "undemanding" valuations and equity-specific policy support.
"This is a micro call, not a macro renaissance. Outside of China, valuations aren't cheap in absolute terms."