The script for 2025 was written after the US elections in November of last year, which called for widespread tariffs, especially on emerging market (EM)-exporting countries that would weaken their economies and hurt their equity performance.

The script also called for a drop in commodity prices and for US large cap stocks to be favored, as they would avoid tariffs paid by foreign producers and benefit from an improved domestic US economy. 

Six months does not make a year, but so far, the reality has been very different. The top-performing country funds include nations like Greece (+59%), Poland (+56%), Austria (+46%), Spain (+44%), South Korea (43%), Germany (35%), Italy (36%), Brazil (34%), and Mexico (+29%).¹ It's a who's who of top tariff-targeting countries. Even China rose by +19% and Vietnam rose by +28%, respectively.² That's much higher than US large cap returns of +7.33% for the same period.³

What is behind the divergence?

The tariffs certainly came …

The US has collected over $100 billion in tariffs so far this year.⁴

… however, the inflation has not

Thus far, it has not resulted in increased inflation for consumers. The Consumer Price Index figures released on July 15 reveal that the three-month average inflation rate created a 2.7% annualized rate, hardly a cause for concern about inflation.⁵

The Producer Price Index remained unchanged month over month, and the annual figure decreased from +2.6% last month to +2.3% this month.⁵

US industrial production rose +0.3% month over month, better than the prior month’s -0.2% fall.⁶

Not hurting emerging economies

China received a large amount of negative attention due to tariffs, yet its Q2 GDP barely dropped from 5.4% to 5.2% compared to the prior quarter.⁷ EM economic growth rates remain nearly double that of advanced economies.

Not hurting commodities

The broad Bloomberg Commodities Index has risen +5.53% this year, as of June 30.⁸

Oil prices have dropped to $65 per barrel from $71 at the beginning of the year, following a dramatically higher Organization of Petroleum Exporting Countries’ production quota increase than expected. In contrast, weakness in oil prices led the energy sector lower.⁹

However, industrial metals, precious metals, and livestock all finished the first half higher, with spot returns of +8.4%, +24.9%, and +18.5%, respectively.¹⁰

The lack of meaningful progress in reducing US debt or deficits, as well as inconsistent tariff messaging, has hurt the value of the US dollar, which has fallen 10.6% through June 30.¹¹

Where to from here?

The commodity outlook always relies, in part, on the outlook for China, as a workshop to the world and a consumer of more than 50% of commodity demand outside the energy sector.

Followers of these monthly insights will undoubtedly recall our failed call for an uptick in Chinese activity in late 2023 and early 2024. The expected stimulus never came in the shock-and-awe-sized manner that the market needed at the time. The failure to appear was partially due to the need to defend the currency against losing ground to the US dollar, and the costly defense of foreign exchange levels was a significant constraint on monetary policy in 2023–2024.

Now that the Chinese yuan is trading at more favorable levels (7.1 Chinese yuan (CNY) per USD), the People’s Bank of China’s slow but steady monetary policy is starting to boost liquidity in the Chinese economy.¹²

Both M1 and Total Social Financing are closely tied to commodity price performance as well as GDP growth.¹³ M1 rose 4.62% in June, which represents the most significant June increase since 2022 in the aftermath of COVID.¹⁴ Total Social Financing rose by 4,199 billion CNY, taking the 12-month moving average up to a record 3,082.6 billion CNY.¹⁵

Detractors note that this reliance on public sector stimulus, without a corresponding considerable growth in corporate credit demand, isn't the ideal scenario. But it is far better than the draconian scenarios that had been priced into the asset markets in January.

Where has first-half performance left valuations?

Equities

Large cap US stock index price-to-earnings ratios remain high at 22.1x, near the 23x level at which they entered the year.¹⁶ The valuation range since 2015 has been 15–23x.¹⁶ Current valuations are near the top end of the range.

The MSCI Emerging Market Equity index's price-to-earnings ratio is 12.9x, which is slightly below the average of the 10–17x PE range over the past decade.¹⁷

Commodities

The correct way to view valuations in commodities is through sentiment.

There remains a high degree of uncertainty about tariff levels, terms of trade, and consumer spending following the termination of the COVID stimulus programs. However, the data behind sentiment indicates that we are closer to extreme low valuations on some commodities and EM equities, which continue to warrant investor attention. Factual information should still shed light in a world of complex and uncertain scenarios.

Endnotes

¹ Bloomberg: MSCI Greece, MSCI Poland, MSCI Austria, MSCI Spain, MSCI South Korea, MSCI Germany, MSCI Italy, MSCI Brazil, MSCI Mexico, 12/31/2024–6/30/2025.
² Bloomberg: MSCI China, MSCI Vietnam, 12/31/2024–6/30/2025.
³ Bloomberg: S&P 500 Total Return, 12/31/2024–6/30/2025.
⁴ "US customs duties top $100 billion for first time in a fiscal year." Reuters, July 2025. https://www.reuters.com/business/trumps-tariff-collections-expected-grow-june-us-budget-data-2025-07-11/.
⁵ "Consumer Price Index Summary." Economic News Release. U.S. Bureau of Labor Statistics, July 2025. https://www.bls.gov/news.release/cpi.nr0.htm.
⁶ "Industrial Production and Capacity Utilization - G.17." Board of Governors of the Federal Reserve System. US Federal Reserve, July 2025. https://www.federalreserve.gov/releases/g17/current/.
⁷ "Instant view: China's Q2 GDP grows 5.2% y/y, above market forecast." Yahoo! Finance, July 2025. https://finance.yahoo.com/news/chinas-q2-gdp-grows-5-024312770.html.
⁸ Bloomberg: Bloomberg Commodity Index Total Return, 12/31/2024–6/30/2025.
⁹ Bloomberg: WTI oil closing price, 12/31/2024–6/30/2025.
¹⁰ Bloomberg: Bloomberg Commodity Index Industrial Metal, Precious Metal, Livestock spot subindex returns, 12/31/2024–6/30/2025.
¹¹ Bloomberg: US dollar index return, 12/31/2024–6/30/2025.
¹² Bloomberg: USD/CNY exchange rate, 6/30/2025.
¹³ M1 is a measure of a country’s money supply that includes the most liquid forms of money available for spending.
¹⁴ "China's June new yuan loans beat forecast after stimulus and trade truce." Reuters, July 2025. https://www.reuters.com/markets/asia/chinas-june-new-yuan-loans-beat-forecast-credit-demand-picks-up-2025-07-14/.
¹⁵ "China's June new yuan loans beat forecast after stimulus and trade truce." MSN, July 2025. https://www.msn.com/en-us/money/markets/china-s-june-new-yuan-loans-beat-forecast-after-stimulus-and-trade-truce/ar-AA1Iz9PX.
¹⁶ "Stock Market P/E Ratios." Yardeni Research, July 2025. https://yardeni.com/charts/stock-market-p-e-ratios/.
¹⁷ "Emerging Markets." Yardeni Research, July 2025. https://yardeni.com/charts/emerging-markets/.
¹⁸ Bloomberg: Contracts held by money managers, 12/31/2024–7/8/2025.
¹⁹ Bloomberg: WTI oil price, 6/30/2025.
²⁰ Bloomberg: Copper contracts held by money managers, 12/31/2024–7/8/2025.
²¹ Bloomberg: Copper price, 6/30/2025.
²² Bloomberg: Corn contracts held by money managers, 12/31/2024–7/8/2025.
²³ Bloomberg: Corn price, 6/30/2025.

Important information

An investor should consider the investment objectives, risks, charges and expenses of the Funds carefully before investing. To obtain a prospectus containing this and other important information, call 844-ETFs-BUY (844-383-7289) or visit www.abrdn.com/usa/etf. Read the prospectus carefully before investing.

Fund Risk: There are risks associated with investing including possible loss of principal. Commodities generally are volatile and are not suitable for all investors. There can be no assurance that the Fund’s investment objective will be met at any time. The commodities markets and the prices of various commodities may fluctuate widely based on a variety of factors. Because performance is linked to the performance of highly volatile commodities, investors should consider purchasing shares of the Fund only as part of an overall diversified portfolio and should be willing to assume the risks of potentially significant fluctuations in the value of the Fund.

The Fund employs a “passive management” – or indexing – investment approach designed to track the performance of the Index. The Fund will generally seek to hold similar interests to those included in the Index and will seek exposure to many of the commodities included in the Index under the same futures rolling schedule as the Index. The Fund will also hold short-term fixed-income securities, which may be used as collateral for the Fund’s commodities futures holdings or to generate interest income and capital appreciation on the cash balances arising from its use of futures contracts (thereby providing a “total return” investment in the underlying commodities).

Through holding of futures, options and options on futures contracts, the Fund may be exposed to (i) losses from margin deposits in the case of bankruptcy of the relevant broker, and (ii) a risk that the relevant position cannot be closed out when required at its fundamental value. In pursuing its investment strategy, particularly when rolling futures contracts, the Fund may engage in frequent trading of its portfolio of securities, resulting in a high portfolio turnover rate.

As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent the Fund invests in a relatively small number of issuers, a decline in the market value of a particular security held by the Fund may affect its value more than if it invested in a larger number of issuers. The value of shares may be more volatile than the values of shares of more diversified funds.

During situations where the cost of any futures contracts for delivery on dates further in the future is higher than those for delivery closer in time, the value of the Fund holding such contracts will decrease over time unless the spot price of that contract increases by the same rate as the rate of the variation in the price of the futures contract. The rate of variation could be quite significant and last for an indeterminate period of time, reducing the value of the Fund.

Changes in the laws of the United States and/or the Cayman Islands, under which the Fund and the Subsidiary are organized, respectively, could result in the inability of the Subsidiary to operate as intended and could negatively affect the Fund and its shareholders.

To the extent the Fund is exposed directly or indirectly to leverage (through investments in commodities futures contracts) the value of that Fund may be more volatile than if no leverage were present.

In order to qualify for the favorable U.S. federal income tax treatment accorded to a regulated investment company (“RIC”), the Fund must derive at least 90% of its gross income in each taxable year from certain categories of income (“qualifying income”) and must satisfy certain asset diversification requirements. Certain of the Fund’s investments will not generate income that is qualifying income. The Fund intends to hold such commodity-related investments indirectly, through the Subsidiary. The Fund believes that income from the Subsidiary will be qualifying income because it expects that the Subsidiary will make annual distributions of its earnings and profits. However, there can be no certainty in this regard, as the Fund has not sought or received an opinion of counsel confirming that the Subsidiary’s operations and resulting distributions would produce qualifying income for the Fund. If the Fund were to fail to meet the qualifying income test or asset diversification requirements and fail to qualify as a RIC, it would be taxed in the same manner as an ordinary corporation, and distributions to its shareholders would not be deductible by the Fund in computing its taxable income.

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ETF002372  9/30/25
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