Emerging markets and the dollar: why not to be bearish on EM for too long

Many investors have assumed that dollar strength is the new normal, but pressure on the dollar is building. And when the dollar does roll over, the history of EM equities suggests the asset class could deliver very strong returns.

  • James Syme
21 Jan 2020
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  • The US dollar and dollar liquidity is a key driver of emerging economies and capital markets.
  • We think that investors have assumed that this is the new
    normal - but pressure on the dollar is building.
  • Both current positioning of emerging economies and historical return patterns suggest that emerging market equities could
    deliver very strong returns when the dollar does roll over - investors should not stay bearish on EM for too long


Past performance is no guarantee of future performance.
The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. Investing in companies in emerging markets involves higher risk than investing in established economies or securities markets. Emerging Markets may have less stable legal and political systems, which could affect the safe-keeping or value of assets. The Fund’s investments include shares in small-cap companies and these tend to be traded less frequently and in lower volumes than larger companies making them potentially less liquid and more volatile. The information contained herein including any expression of opinion is for information purposes only and is given on the understanding that it is not a recommendation. 

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