The MSCI Emerging Markets Index is higher by almost 5% over the past week, a sign that developing economies are responding positively to the U.S. presidential election outcome and encouraging developments on the coronavirus vaccine front.
These developments highlight potential with WisdomTree’s Emerging Markets Multi-Factor Model Portfolio.
“This model portfolio is designed for investors with a long-term horizon looking for exposure to a broad universe of Emerging Market equities primarily using factor focused ETFs,” according to WisdomTree. “The selected ETFs provide certain factor tilts that have the potential to generate excess return relative to comparable cap-weighted benchmarks over longer-term holding periods. The strategies may use both WisdomTree and non-WisdomTree ETFs.”
Another benefit of this model portfolio is that emerging markets central banks are aggressively easing off, and the fruits of their labor could be harvested early next year.
Good Vibes for Emerging Markets Model Portfolios
“A swathe of top investment banks and funds are piling into emerging market assets on a double-lift in confidence after U.S. President Donald Trump’s election defeat and this week’s coronavirus vaccine breakthrough,” reports Reuters.
Emerging markets can continue to enjoy a recovery if a tailwind of factors can keep blowing in their favor. This should give EM exchange-traded fund (ETF) investors something to cheer about whether they’re focused on equities.
According to Reuters: “The vaccine news provides an extra boost, simply by improving the global growth outlook and especially the demand —including for commodities — from advanced economies,” Barclays’ Christian Keller wrote, adding EM would be ‘a winner’ from the U.S. election.”
Covid-19 put the hammer down on emerging markets (EM) just as the group was getting 2020 started on the right foot. However, now could be an opportune time for getting EM exposure as economies try to recover from the pandemic. While the EM space has seen better days, the group has the historical ability to outperform.
There are other factors pointing to advantages with the aforementioned WisdomTree model portfolio.
“Emerging markets have enjoyed steady inflows in recent months after investors pulled some $100 billion out in early spring, according to IMF estimates,” notes Reuters. “There is also emerging markets’ traditional lure of the higher interest rates at a time when many richer economies now have either virtually zero or negative rates.”
For more on how to implement model portfolios, visit our Model Portfolio Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
