26 Aug COTW: Closing the Barn Door on Emerging Market stocks
- Global growth first began to slow roughly 18 months ago and emerging market stocks have dropped 13% from the interim high for global stocks in late January 2018.
- Furthermore, emerging market stocks are lower by over 11% since the unofficial start of the Trade War in March 2018. They are also down 7% since the all-time high in U.S. large cap stocks last month.
- We don’t disagree that emerging market stocks generally are riskier than developed market assets and if the world enters a severe recession we would expect them to decline in the short term; however, as the chart below shows, they remain far more attractively priced than U.S. stocks which means they will probably deliver better long-term returns. While emerging markets have trailed their U.S. peers dramatically for most of the last several years, recent performance has been more closely in line, which may suggest a shift in market leadership.
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