Emerging markets are rebounding nicely to end 2020, and that theme is expected to continue in the new year. Active managers may want to revisit developing economies.
Emerging markets equities are turning higher, and many market participants are bullish on the prospects for the asset class heading into 2021.
Covid-19 put the hammer down on emerging markets (EM) just as the group was getting 2020 started on the right foot. While the EM space has seen better days, the group has the historical ability to outperform.
“Emerging markets were near three-year highs on Tuesday, with India, South Korea and Taiwan at records,” reports Kers Lahiff for CNBC. “The economically sensitive EEM emerging market ETF has rebounded nearly 70% from its March lows, keeping pace with the gains in the S&P 500. Ari Wald, head of technical analysis at Oppenheimer, said this is a move that has been years in the making.”
The coronavirus pandemic has amplified the growth trend in emerging market equities. Investors should tread cautiously, focusing on quality companies in developing economies as some segments become increasingly pricey.
Renewed Investing Interest Abroad
“Nancy Tengler, chief investment officer at Laffer Tengler Investments, is advocating exposure to emerging markets based on expectations for global economic growth in 2021,” according to CNBC.
Some active managers believe China could deliver over 50% of global GDP over the next couple years as the rest of the world slowly recovers from the economic impact of COVID-19. China’s resiliency and growth in a year riddled with coronavirus-induced weakness have attracted many equity managers looking for some level of certainty, along with those seeking the flavor-of-the-month pick. Invesco has observed a rapid spike in investor interest for China, especially among those with little experience and no visible mandate investing there, which have fueled pockets of excess.
“We’ve taken a two-pronged approach. We have an actively managed global ETF strategy, run by my partner Arthur Laffer Jr., and in there he began increasing his exposure to EM, first with China in the second quarter and then added in Taiwan,” Tengler said in an interview with CNBC.
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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.