Emerging markets – Tamed Child O’ Mine

By July 21, 2020 14:48

Emerging markets – Tamed Child O’ Mine

This paper highlights five reasons why Emerging Markets (EM) in aggregate are more resilient today than in prior periods. A “healthier” index composition in addition to four other reasons support our analysis that EM drawdowns will be significantly more muted than previous peakto-trough drawdowns. The 30% rebound that the asset class has experienced since its trough in late March is in line with our thesis of a more robust index. In GMO’s recent Quarterly Letter, Ben Inker, Head of our Asset Allocation team, made the case for emerging stocks given their lower relative valuations. We acknowledge the heterogeneity of the asset class but take comfort in China at 40% of the MSCI EM Index being resilient, with better growth prospects and plenty of residual dry powder. Not only has the weight of cyclical sectors like Energy and Materials shrunk (from 30% to 12%), there has also been a significant improvement in their balance sheets. Some domestic consumer-driven and growing sectors such as Information Technology and Internet/ Media names are now nearly one-third of the index. In our April 2020 paper, “Covid-19: Risk and Resilience in Emerging Markets,” we provided a framework to assess the most vulnerable EM nations and those best placed to emerge less scathed than others from the pandemic. We identified only 9% of emerging countries as high risk vs. 66% as safe countries.

By July 21, 2020 14:48


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🇺🇸S&P 500 Total Return Attribution

Multiple expansion explains the S&P 500's total return YTD, despite negative earnings growth 👉 https://www.isabelnet.com/?s=return

h/t @SoberLook #markets #investing #assetallocation #returns
#sp500 $spx $spy #stocks #earnings #EPS #stockmarket #equities

🇺🇸 S&P 500

Do valuations still matter? This chart puts into perspective the wide divergence between the S&P 500 and the US economy 👉 https://www.isabelnet.com/?s=S%26P+500

h/t @LanceRoberts #valuation #markets #investing #sp500
$spx #spx $spy #stocks #stockmarket #equities #GDP #economy

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July 2020