Markets

3 reasons to stick with emerging markets

Aphotostory / Shutterstock
Aphotostory / Shutterstock

For the first time since late 2016, emerging markets (EM) are under-performing their developed market counterparts. While few asset classes-outside of oil-are having a stellar year, EM is having a particularly bad time. An index of developed equity markets is roughly flat year-to-date; EM stocks are down approximately 2%. Emerging market bonds are having an even worse year, down more than 5%. What's going on? Is it time to lighten up on the asset class? The answer to the latter question is no. A number of catalysts are to blame. Emerging markets are struggling with a sharp and abrupt reversal in the dollar, concerns about global growth and idiosyncratic issues surrounding particular markets such as Turkey and Brazil. That said, there are three good reasons to stick with the asset class.

1. The return of relative value.

relative value, price-to-book
no time to abandonFinal

2. Despite the typical first quarter slowdown, the global economy is in solid shape.

key for EM

3. A stronger dollar is a headwind, not a death sentence.

Expecting a better second half

Russ Koesterich , CFA, is Portfolio Manager for BlackRock's Global Allocation team and is a regular contributor to The Blog .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

iShares

iShares unlocks opportunity across markets to meet the evolving needs of investors. With more than twenty years of experience, a global line-up of 900+ exchange traded funds (ETFs) and $2.81 trillion in assets under management as of March 31, 2021, iShares continues to drive progress for the financial industry. iShares funds are powered by the expert portfolio and risk management of BlackRock.

Learn More