Emerging Markets 2020 – Bear or Bull?

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By Patricia Ribeiro - First Quarter 2020

Emerging markets remain a very attractive asset class going into 2020. Valuations are in an attractive range and, in our view, provide interesting investment and compelling opportunities going into 2020. Here’s my take on the year ahead.

Growth in 2020

Growth expectations in 2020 are higher for emerging markets than developed markets, and we believe the valuations are also more attractive. If the U.S. Federal Reserve continues to bring rates down like they did in 2019, it can only help emerging markets. We think consumption and investments in this space should continue, which supports an environment for interesting investment opportunities. A big contributing factor is that inflation is tame across the board, with a couple of exceptions.

Geopolitical Risk?

The lack of resolution in the US-China trade war continues to be a challenge for us—probably more from a sentiment point of view versus actual economic impact. We saw a lot of Chinese companies trying to manage their dependency on the U.S. in 2019 to mitigate the impact of the trade war. I think that is likely to continue into 2020.

The 2020 U.S. elections could also bring volatility to global markets generally. If there’s volatility in the U.S. market, we think it has the potential to trickle down to emerging markets as well.

Do Headlines Matter?

News headline challenges are nothing new for emerging markets. That’s why we believe it’s so important to take a fundamental, long-term point of view.

The emerging markets asset class is made up of countries at different stages of their economic cycle. There are some emerging markets, such as Brazil, that are at an inflection point and they are starting to accelerate. Then there are others whose acceleration saw a bit of a setback because of the trade war with the United States. In the case of China, the government implemented enough policies to help the economy, which is why we see positive trends there.

Finally, there are other emerging economies where we are not seeing positive trends just yet. For example, India still needs to work out some structural issues with its economy.

Overall, we believe growth in emerging markets will remain strong in 2020, and we continue to find plenty of attractive opportunities in emerging markets going into 2020. 

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Patricia Ribeiro
Patricia Ribeiro
SVP, Sr. Portfolio Manager
Emerging Markets

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