So what do these truths means for investors? Over the long term, the movement that we have seen in currencies, interest rates and emerging market equities is actually a good thing as it facilitates a much-needed macroeconomic adjustment. Recent events also remind investors that it’s impossible to time the markets. That said, I still view emerging markets as a strategic asset class and wouldn’t abandon them.
Finally, given that not all emerging markets look equally attractive, I continue to advocate taking a more discerning approach to this asset class. I also am a proponent of expanding the definition of emerging markets to include frontier markets, which are up roughly 18% since last year.
The bottom line: If you want exposure to the economic growth and financial deepening in these markets, consider allocations over the medium and long term, selectively finding value and waiting out the storm.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Source: BlackRock, Bloomberg