Emerging-market stocks - even in Venezuela - are rallying after Maduro's capture

By Christine Idzelis

Investors still worry about ripple effects

Investors may be hoping that U.S. intervention may help stabilize Venezuela's economy and influence more market-friendly policies in the region, one portfolio manager said.

Stocks in emerging markets seem untroubled by geopolitical risk in Venezuela, at least so far, even on the exchange in Caracas.

The iShares MSCI Emerging Markets ETF EEM, a U.S.-listed exchange-traded fund that provides broad exposure to stocks in such countries, rose on Tuesday to book a third straight day of gains, according to FactSet data. The Vanguard FTSE Emerging Market ETF VWO also appeared unrattled by the U.S. ouster of Venezuelan President Nicolás Maduro, continuing to rise this week even after his capture in a surprise military operation over the weekend.

"I'm actually frankly surprised at how well emerging markets in general, and Latin America in particular, have held up," said Derrick Irwin, senior portfolio manager for emerging-market equities at Allspring Global Investments, in a phone interview. "It's the second-order effects down the road that I think we need to keep an eye on."

The United States has clearly put "down their chips that they will maintain supremacy in the Western Hemisphere," he said, adding that investors may be hoping that U.S. intervention may help stabilize Venezuela's economy and influence more market-friendly policies in the region.

The Bursatil index, which tracks stocks in Venezuela, has surged 87% this year, including as 50% jump on Tuesday, according to LSEG data.

Still, Irwin worries about ripple effects from the ouster of Maduro, who was taken to jail in Brooklyn. President Donald Trump has said the U.S. would "run" Venezuela in the meantime, but Irwin worries the removal of Maduro from power risks heightening political tensions globally.

Also read: Opinion: Trump's actions in Venezuela made the emerging-markets fund in your 401(k) riskier

China, which has "very significant" investments in Venezuela, had been making "significant inroads" in Latin America, he said, putting Chinese economic interests at stake.

The iShares Latin America 40 ETF ILF, which seeks exposure to established companies in Latin America, climbed Tuesday for a third straight day, according to FactSet data. The fund's top two geographical exposures, by far, were Brazil and Mexico as of Jan. 5, with its five biggest sector exposures being financials, materials, consumer staples, energy and industrials, data on BlackRock's website showed.

Markets sometimes struggle to price in longer-term political risks, according to Irwin.

Westwood's chief investment officer for multi-asset strategies, Adrian Helfert, is also monitoring the risk of geopolitical spillover, with concern it could create "medium-term volatility in China-linked emerging markets."

"China has invested heavily in Venezuelan energy and political influence throughout Latin America, making this outcome a meaningful strategic setback for Beijing," he said. "Chinese officials have already drawn comparisons to Taiwan, suggesting Beijing may view this as a template for intervention in its own sphere of influence."

While Venezuela has vast oil reserves, the country produces just 0.8% to 0.9% of the global crude supply, which is "not large enough to create structural supply shocks," according to Helfert.

Investors should continue to consider including international stocks in their portfolio in 2026, as they may provide diversification even after the "spectacular performance" of emerging markets last year relative to U.S. equities, according to Gargi Pal Chaudhuri, BlackRock's chief-investment and portfolio strategist for the Americas.

For investors seeking investment opportunities in artificial intelligence beyond U.S. stocks, emerging markets in Asia provide AI exposure, she said by phone. For those looking to diversify internationally beyond AI, she recommended that investors focus on dividend-paying stocks in developed markets, which "tilt more toward that value exposure."

The iShares International Dividend Growth ETF IGRO is one way to find such exposure, she said. Shares of the fund are up 1.7% this year through Tuesday, according to FactSet data.

Emerging markets outperform

The U.S. stock market is trailing emerging markets broadly to start 2026, with the S&P 500 SPX up 1.5% this year after scoring a fresh record peak on Tuesday, according to Dow Jones Market Data.

The iShares Core MSCI Emerging Markets ETF IEMG, iShares Latin America 40 ETF and iShares MSCI China ETF MCHI are all up more than 4% in January, according to FactSet data. The iShares MSCI Taiwan ETF EWT, which invests in equities in that country, has gained 3.6% so far this month after booking a third straight day of gains on Tuesday.

"Brazil remains among the most uncertain situations in Latin America, after Venezuela," Thierry Wizman, a global currency and rates strategist with Macquarie Group, said in a note this week. Brazil has a general election this year, he noted.

The iShares MSCI Brazil ETF EWZ, which invests in the country's equities market, has climbed more than 4% this month. The Franklin FTSE Brazil ETF FLBR has gained around 4% so far in January, FactSet data shows.

Elsewhere in Latin American equities, the iShares MSCI Mexico ETF EWW and Franklin FTSE Mexico ETF FLMX have each lagged with a 1% gain in 2026 through Tuesday., according to FactSet data.

"We don't worry about whether the situation of Mexico President Claudia Sheinbaum is made precarious in a post-Nicolás Maduro world," said Wizman. "Her situation is safe; Mexico will be OK."

-Christine Idzelis

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01-06-26 1658ET