Following a hugely volatile summer, emerging markets rebounded in September. Is the comeback sustainable?
Emerging market (EM) assets have been selling off this year as a stronger US dollar and higher US rates made external funding more expensive; outflows from EM funds also added to the sell-off. But September saw a rebound, and even the most affected markets such as Turkey and Argentina regained ground after policymakers took remedial action. Also, investors saw value in EM assets, especially those with a high credit rating, and inflows resumed. So is the tide really turning for the EMs? Or is this just a temporary improvement, and will renewed US dollar strength or another jump in US rates erase it?
Although this year’s Ryder cup has been and gone, it highlighted that Europe is more than capable of outperforming the USA. Equity markets have not yet seen the same results, but could now be the time for a swing in momentum?