With the US economy cooling and interest rates approaching a likely peak, a new cycle in emerging markets is drawing near. How should investors approach it? In a new paper we offer this suggestion: abandon your preconceptions. That’s because the next cycle is likely to differ from any that have gone before.
We believe that after a long period of rebalancing, valuations of emerging market assets look attractive
The paper takes a deep dive into the previous two economic cycles in emerging markets and considers what lessons they hold for investors.
We believe that after a long period of rebalancing, valuations of emerging market assets look attractive. For investors with an understanding of the risks, an appropriate time horizon and realistic expectations, we regard this as an attractive entry point and a good time to reassess existing allocations.
As it says on nearly every investment publication, ‘past performance is no guide to the future’. Investors whose views on emerging markets are anchored in either of the last two cycles would do well to pay particular attention to those words as a new economic regime approaches.
The value of investments, and any income generated from them, can fall as well as rise.
Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.
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All rights reserved. Issued by Investec Asset Management, issued February 2019.