Emerging market equities are considered a very risky asset. Usually, their performance is inversely correlated to the strength of the #usdollar (strong dollar produced weak EM returns) and as such, #emergingmarkets equities are suffering these days. According to the chart below, they have been on a negative streak for 4 consecutive quarters. This phenomena has only happened twice in the last 25 years. Fears of global recession and high inflation are pushing investors to safe(?) assets, putting selling pressure on emerging markets, which, interestingly enough, have better debt to gdp ratios (with notable exceptions) than their developed counterparts. Does this mean that dollar strength is coming to an end? Should the losing streak for EM equities continue for another quarter? At what point investors will see EM as an investment opportunity?
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Source: bespoke investments
