Emerging Markets in 2017: Rebalancing Growth
• The impact of the U.S.’ new administration could challenge the status quo of global trade and could also create a massive infrastructure build, triggering a surge in demand for commodities. Performance in the emerging markets could be split between cyclical and manufacturing countries.
• China: A stronger U.S. economic recovery allows China to address some of its structural issues and wean itself off investment-focused growth into a more sustainable developmental model.
• India: India remains one of the most attractive economies in the world. A good 2016 monsoon season and a better global cyclical outlook are positive catalysts for consumption and economic growth in 2017.
• Brazil: After three years of economic hardship, the economy is showing important signs of improvement, and inflation continues to decrease. Despite these positive developments, Brazil still has much work ahead of it and we expect volatility in the near term.
• Russia: Russia is poised to return to growth after two years of recession. The economy benefits from higher oil prices, which translate into a stronger currency, lower inflation and improved consumer sentiment.
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.