The beauty of EM investing is you can find opportunities in stocks or bonds beyond the narrow focus of headlines.
Signs of a recovery in emerging markets early this year have given way to worries about China’s economic slowdown and sluggish growth in Europe and Japan. But beyond the negative headlines we think many risks that weighed on the market last year have faded and the earnings outlook is relatively strong.
The Turkish lira has dropped 35% as of August 16, putting pressure on inflation as well as the country’s debt-heavy corporations and banks. Investor jitters have spread over the past week to some other emerging markets and European banks with Turkish exposure, but we don’t expect contagion to expand much further from here.
Turkey’s currency crisis has spooked emerging-market (EM) investors, especially amid growing concern about the strengthening US dollar. We think countries and companies in the developing world are actually much more resilient to a stronger dollar than in the past.
There are a lot of suggestions these days about where to get extra income, but less discussion about the cost attached to it. A diversified multi-asset approach can help—and provide additional growth potential. But how it’s designed matters.
We’ve had, finally, after many years, an acceleration in earnings growth, far faster than the kind of growth we’ve seen in developed markets, and that’s expected to continue into 2018; and I think that’s going to be an important underpinning of strong returns for emerging-market investors.
Emerging markets offer investors plenty of opportunity, but managing downside risk effectively is critical. A flexible framework that integrates multiple asset classes can help.
The nascent recovery in emerging markets has been thrown into question by Trump’s election. While the concerns warrant attention, we still see compelling reasons to invest in developing economies.
Emerging-market stocks have suffered from a Trump-induced hangover after surging through the first 10 months of 2016. We think investors should put the new risks into perspective.
Investors are increasingly using passive portfolios to boost exposure to emerging markets and keep volatility under control. We see better ways to reduce the risks while sourcing returns from across the developing world.
After a strong stretch for emerging markets so far in 2016, some investors wonder whether the rally still has legs. Although stock valuations have risen, we think signs point to yes.