Insights
Emerging Markets: Stepping Into the Spotlight
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Big Picture
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May 21, 2024
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May 21, 2024
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Emerging Markets: Stepping Into the Spotlight |
In the 2010s, emerging market (EM) equities suffered their worst performance as an asset class since the 1930s.1 They returned a mere +49%, compared to an average of +203% in the previous seven decades.2 Emerging market countries ran high twin deficits, which led to currency depreciation and forced a cleanup of excesses from their over-leveraged balance sheets, a legacy of loose fiscal and monetary policies. The growth differential between emerging economies and the developed world, historically a key driver of relative equity returns, had also deteriorated in the last decade, a factor which is now turning in favor of EM. After lagging the developed markets (DM), especially U.S. equities which have been dominated by the performance of a handful of stocks, emerging markets are in a much stronger position to outperform developed countries this decade.
There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline and that the value of portfolio shares may therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in this portfolio. Please be aware that this portfolio may be subject to certain additional risks. In general, equities securities’ values also fluctuate in response to activities specific to a company. Investments in foreign markets entail special risks such as currency, political, economic, market and liquidity risks. The risks of investing in emerging market countries are greater than the risks generally associated with investments in foreign developed countries. Stocks of small-capitalization companies entail special risks, such as limited product lines, markets, and financial resources, and greater market volatility than securities of larger, more-established companies. Derivative instruments can be illiquid, may disproportionately increase losses and may have a potentially large negative impact on the Portfolio’s performance. Illiquid securities may be more difficult to sell and value than public traded securities (liquidity risk). Non-diversified portfolios often invest in a more limited number of issuers. As such, changes in the financial condition or market value of a single issuer may cause greater volatility. Cryptocurrency (notably, Bitcoin) operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. It is not backed by any government. Federal, state or foreign governments may restrict the use and exchange of cryptocurrency. Cryptocurrency may experience very high volatility.
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Deputy CIO, Solutions & Multi Asset Group; Head of Macro & Thematic Research, Emerging Markets; Portfolio Manager, Passport Equity
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