2021 Emerging Markets Outlook: Checking All the Boxes
- Emerging market equities show significant growth potential for 2021. We believe there is notable opportunity for a market re-rating in 2021 driven by a Covid-19 vaccine-led recovery in global demand, a weaker US dollar stemming from dovish monetary policy and increased fiscal stimulus, and a low global interest rate environment.
- Asia ex-Japan: We are increasingly optimistic about the outlook and growth
recovery for Emerging Asia ex-Japan. We believe the region will likely continue to benefit from an improving global growth outlook on the back of vaccine advancements. We also see an opportunity for renewables driven by an increasing ESG awareness and government investments in sustainable infrastructure.
- Latin America: Coming from depressed asset prices, Latin America should be one of the largest beneficiaries of synchronized global growth in 2021. A recovery in global activity led by a Covid-19 vaccine combined with a weaker US dollar should support commodity prices, which could translate into foreign direct investment and job growth in the region.
- Eastern Europe, Middle East & Africa (EEMEA): EEMEA boasts a wide range of opportunities based on discounted multiples, a rebound in global demand for natural resources, improving geopolitical rhetoric, and sound domestic consumption stories. We are most optimistic about Russia, driven by a combination of attractive valuations and macroeconomic tailwinds.
Investment Risk — 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.
Market Disruption and Geopolitical Risk — Geopolitical and other events, including war, terrorism, economic uncertainty, trade disputes, natural and environmental disasters, systemic market dislocations, public health crises, and related geopolitical events have led, and in the future may lead, to increased market volatility, which may disrupt U.S. and world economies and markets and may have significant adverse direct or indirect effects on the value of a Fund and its investments.
Market Turbulence Resulting from Covid-19 — The outbreak of Covid-19 has negatively affected the worldwide economy, individual countries, individual companies, and the market in general. The future impact of Covid-19 is currently unknown, and it may exacerbate other risks that apply to a Fund.