Analysts at BHH shared their views on Emerging Markets, "We continue to think that investors will continue to differentiate within EM, favoring those countries with stronger fundamentals. This environment should make a fundamentally-based allocation model such as ours much more accurate in picking winner and losers."
Key Quotes
"After the US election surprise, the prospect of significant fiscal stimulus from the incoming administration led to a steepening of the US yield curve. The Fed is likely to be more hawkish as a result, and the dot plots signal three hikes next year. EM rarely does well in a rising US rate environment."
"On the other hand, two mitigating factors for EM equities are 1) higher commodity prices and 2) rising DM equity markets. Along with the recent drop in US yields, these offsetting factors have helped MSCI recoup almost all of the post-election losses."
"Whatever the pace and scope of Fed tightening is, we still believe it is very important for investors to continue focusing on country fundamentals and also on hedging out currency risk whenever feasible. Regionally, Latin America is the best equity performer so far in 2017 (up 5.2%), followed by Latin America (up 3.9%) and then EMEA (up 0.3)."
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