Blokland’s daily sketch

Blokland’s daily sketch

14-05-2021 | Daily sketch
Brakes on emerging markets
  • Jeroen Blokland
    Portfolio Manager
Global growth is skyrocketing, commodity prices are spiking, and a US dollar bull market is not that likely at this point in time. Historically, such circumstances have benefited emerging market equities from both an absolute as well as a relative perspective. Yet, the outlook for emerging markets looks less exuberant this time around. This has to do the relationship between relative GDP growth and the performance of EM equities versus DM equities. As today’s chart – from UBS – neatly shows, the smaller the gap in EM-DM GDP growth, the less attractive the relative performance of EM has been. Because of massive stimulus in developing markets, the GDP growth gap will decline further this year and next. One thing to keep in mind, however, is that relative GDP growth tends to move in longer cycles. During those cycles, other factors such as commodity prices, the US dollar and relative valuation can still translate into shorter periods of EM outperformance.
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As a senior portfolio manager I use charts to illustrate financial issues every day. I tweet my favorites as @jsblokland and was named 'one of the 50 most important people for investors to follow in 2018' by MarketWatch.
Previous editions of the daily sketch can be found on my personal financial markets blog. All graphics provided are collected from Bloomberg data and public websites. They do not always reflect my personal opinion and may also not necessarily reflect the opinion of Robeco. Please cite all references or quote the original source if replicating content.

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