Whenever markets underperform for years, some people go bottom fishing. The largest EM exchange traded fund, Vanguard FTSE Emerging Markets ETF VWO, That makes me think the latest emerging markets pseudo-rally one of several in this secular bear market is running out of steam.
Yet pundits and commentators are once again recommending emerging markets. Yes, valuations of emerging markets look attractive. Meanwhile, the International Monetary Fund has revised its GDP growth estimates down for major EM economies like Mexico, India and Brazil.
The World Bank expects EM GDP growth to accelerate to 4. If the Federal Reserve hikes the federal funds rate at least three times this year while other central banks stand pat or cut rates, how can the dollar not strengthen?
And if President Donald Trump carries out the policy miracles his ardent followers expect shredding regulations, cutting business and personal taxes, passing a big infrastructure package , inflation will pick up and the Fed would raise rates even faster, boosting the dollar more.
3 Emerging-Market Stocks Prepared to Take Off - TheStreet
A stronger dollar is bad for oil and other commodities in which emerging markets specialize Russia, Brazil and Mexico, for example. Greater dollar strength would likely clobber Latin America, which depends heavily on commodity exports and whose MSCI EM Latin America index surged These stocks have come a long way in a short time and are ripe for correction; greater strength in the dollar would do the trick.
Trade wars would hurt emerging markets most. But stiff tariffs and trade wars would hit emerging markets particularly hard , especially China and Mexico, the top two exporters to the U. No investor should trust it. Gold is a MarketWatch columnist and founder and editor of GoldenEgg Investing , which offers exclusive market commentary and simple, low-cost, low-risk retirement investing plans.
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