Emerging Market Opportunities in a Post Covid-19 World
We see an attractive backdrop for emerging market (EM) equity performance in a post Covid-19 world. This is based on four pillars: (1) a powerful alignment in China stemming from significant monetary easing and fiscal stimulus, along with rebounding numbers from the US-China trade war and the current Covid-19 period, (2) a global ultra-low interest rate environment, (3) a lack of inflation across EM, and (4) developed market countries implementing inflationary measures, which should not only spur growth (global demand), but also weaken their currencies vs. EM currencies. We believe that prices have dislocated from fundamentals and that EM equities are positioned for a rally in the second half of the year.
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.