As global growth recovers from the shock of Covid-19 and begins to normalize, investors face key questions such as how long will high inflation last; Will the central bank tightening shift the risk balance from higher inflation to slower growth? Are emerging market assets attractive enough to attract a return from foreign investors? and can the financial risk in China be contained.
In general, we believe that the environment continues to favor risky assets (equities) over safe-haven instruments (bonds) as long as the real return remains low. In emerging markets, the 12-month forward price / earnings ratio to global equities has fallen to its lowest level in 10 years, suggesting that emerging market equities are offering good value. The likelihood that China could wreak havoc on world markets seems low.
Watch our monthly asset allocation video with Daniel Morris for our assessment of rising inflation, factors affecting economic reopening and the chances and timing of interest rate policy normalization by banks power stations.
All opinions expressed herein are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may have different opinions and make different investment decisions for different clients. The opinions expressed in this podcast do not constitute investment advice in any way.
The value of investments and the income from them may go down as well as up and investors may not get their original stake back. Past performance is no guarantee of future returns.
Investment in emerging markets, or in specialized or small sectors is likely to be subject to above average volatility due to a high degree of concentration, greater uncertainty as less information is available. available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, portfolio transaction, liquidation and custody services on behalf of funds invested in emerging markets may involve higher risk.