Goldman Sachs The Markets
Are emerging markets due for a comeback?
Nov 10, 2023
Exploring underperformance of emerging markets, China's role, potential for resurgence, optimistic about specific markets, impact of interest rates on equities, predicting better performance but challenges, importance of monitoring rates and recession risks.
06:10
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Quick takeaways
- Emerging markets' underperformance is due to decelerated growth, resulting in lower valuations for equities.
- Emerging markets' performance should be evaluated in the broader global context, rather than solely attributing it to specific market characteristics.
Deep dives
EM equities are optically cheap but growth has slowed
Emerging markets (EMs) are often considered cheap relative to US equities, but this may be due to the slowdown in growth. While EMs were once known as growth markets, the growth has considerably decelerated. This has resulted in lower valuations for EM equities, reflecting the reduced growth expectations. The perception that EMs are cheap is primarily due to the lack of investor interest and sentiments of being unloved in the market.
