Return to: Investor | Country
Emerging markets
28 Mar 2018 | By Nick Payne

Why emerging market equity investors shouldn’t fear the Fed

As was widely anticipated, Jerome Powell, the new chairman of the US Federal Reserve, notched up the first interest rate rise on his monetary tightening belt.

  189 viewed

As was widely anticipated, Jerome Powell, the new chairman of the US Federal Reserve, notched up the first interest rate rise on his monetary tightening belt. The increase is expected to be the first of four this year. Judging by the sanguine reaction of the MSCI Emerging Markets Index, emerging market equity investors are none too worried… and here’s for why. If historic precedent is anything to go by, the asset class has outperformed its developed market peer group in four out of the last five rate-tightening cycles. Rather than obsess over central bank action, investors are looking, correctly so, at the recovery in emerging market earnings growth and company valuations. And so far, there is little evidence to suggest that the emerging market ship will be blown off course anytime soon. Unless President Trump aggressively turns up his rhetoric on protectionism, emerging markets, for now, continue to be driven by controlled inflation on the one hand, and increased corporate profits on the other. The actions of the US Federal Reserve are all part and parcel of the normalisation of growth. The global economy is healing – emerging markets play a significant part in that.

RELATED ARTICLES
Next article:
Turkey’s crisis: policy response disappointing so far

13 Aug 2018 | By Delphine Arrighi

Delphine Arrighi comments on the Turkish economic crisis.

Read More
03 Dec 2018 | By Nick Payne
Has Santa come early for emerging markets?

Nick Payne believes the respite in the Sino-US trade war is an early Christmas gift for emerging market equities.

30 Oct 2018 | By Nick Payne
Advantage of Terrain: A guide to spotting winning companies

Companies with sustainable profitability have found ways to benefit from competitive positioning and economic terrain

Loading....%