A common refrain before the election was that emerging markets assets would benefit from a Joe Biden win. That’s exactly the scenario investors are being treated to.
With that result comes opportunity with the 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.”
Data confirm investors like the idea of Biden in the Oval Office as it pertains to developing economies. Over the past week, the widely followed MSCI Emerging Markets Index is higher by 7.20%.
An Emerging Markets Renaissance?
Plenty of high-level investors are constructive on emerging markets against the Biden backdrop.
“The prospect of a Joe Biden presidency checked by a divided Congress has gotten everyone from Eaton Vance Corp. to Medley Global Advisors predicting a fresh boost for risk assets, just a week after the stocks, currencies and bonds of developing nations hit the buffers as the U.S. election approached,” according to Bloomberg.
Emerging markets investors are once again back as world economies begin the recovery process from Covid-19. But investors are not simply throwing darts at the board.
A victory by former Vice President Joe Biden on Election Day could lift emerging markets assets because it’s expected his tone toward China – the largest developing economy – will be far less bellicose than President Trump’s has been.
“Positive spillovers to global growth from increased fiscal stimulus, more predictable U.S. trade and foreign policy and the prospect of a weaker dollar amid negative U.S. real rates in the event of a Democratic sweep would all bode well for EM assets, we believe,” according to BlackRock.
The blue wave didn’t materialize, but Democrats can still gain control of the Senate pending two run-offs in Georgia in January. Still, the setup for the WisdomTree model portfolio is favorable.
“Gains for emerging markets would support the view that the election result is likely to cap U.S. interest rates for longer and weaken the dollar, boosting the debt and currencies of developing nations as they struggle to finance efforts to contain the worst of the Covid-19 pandemic,” according to Bloomberg.
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.
