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2019 Emerging Markets Outlook

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2019 Emerging Markets Outlook: Opportunities Beyond a Tumultuous Year

  • We believe that emerging market (EM) prices have dislocated from fundamentals and that EM equities are positioned for a significant rally in the coming year.
  • We do not expect US-China trade tensions to disappear, but we do believe they will de-escalate into 2019. A de-escalation in the trade dispute between the US and China should act as a meaningful catalyst for an EM led rally in global equities.
  • Asia ex-JapanWe expect short-term volatility in Asia ex-Japan to continue as market participants wait to gain some clarity on key global macro concerns. However, Asian markets should offer better risk-reward opportunity in 2019 as the positive impact of measured consumption stimulus works through the Chinese economy and on Prime Minister Modi’s potential re-election.
  • Latin AmericaLatin American economies should benefit from a shift back to prudent and fiscally responsible policies. We believe this allows for necessary reforms that will lead to growing consumer confidence, stronger currencies, lower inflation, and better prospects for growth.
  • Eastern Europe, Middle East & Africa (EEMEA)EEMEA contains a wide-range of opportunities based on valuation, growth, economics, and politics. We see opportunities for outperformance in Egypt and continue to believe that Russia is both undervalued and well positioned to benefit from a combination of low inflation, a stable currency, and increasing foreign invest­ment from China and the Middle East.

 

Investment Considerations — There can be no guarantee that any strategy (risk management or otherwise) will be successful. All investing involves risk, including the potential of loss of principal.

Emerging Markets Risk — The risks of foreign investments are typically greater in less developed countries, which are sometimes referred to as emerging markets. For example, political, legal and economic structures in these country may be changing rapidly, which can cause instability and greater risk of loss. These countries are also more likely to experience higher levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Similarly, investors are also subject to foreign securities risks including, but not limited to, the fact that foreign investments may be subject to different and in some circumstances less stringent regulatory and disclosure standards than U.S. investments.

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