Despite near-term concerns and likely volatility across
the global equity market, we believe the long-term
fundamentals in emerging markets will continue to
offer opportunities. We base our view on several key
- Emerging markets generally are in the early stages
of their developmental life cycles.
- Favorable demographics, increasing incomes and
improving financial markets can make emerging markets
attractive for trends in consumption, productivity growth
- The emerging world is home to many high-quality
companies that often are driving innovation in both their
home countries and around the world.
In addition to the long-term drivers, we believe other factors
will support emerging markets through year end:
- Dovish policy from the Fed removes one of the headwinds
that emerging market currencies faced in 2018.
- Many emerging market nations are likely to continue
to grow GDP at a healthy pace, despite global growth
deceleration. We consider this to be a foundation for
wealth creation and the middle class consumption
growth that underlies many of the potential investment
opportunities in the region.
- While visibility into future earning is foggy, we think the
emerging markets offer better value relative to the U.S.
Because the effects of the tax cuts and one-time benefits
that accelerated U.S. corporate earnings in 2018 have
passed, we believe emerging markets now offer a more
favorable risk/reward profile.
Factors affecting key emerging markets for remainder of 2019
China (including Hong Kong)
With a prolonged trade war now becoming a likely scenario,
we expect China to continue stimulus. We already see early
measures that are benefiting the private sector, personal
consumption and infrastructure spending, and we think more
such measures are likely. In addition, China has announced a
number of policy changes focused on infrastructure spending,
increased access to credit for the private sector, tax cuts and
fewer regulations on a variety of industries.
After a record-setting recession, Brazil is in the early stages
of a recovery. There is evidence President Jair Bolsonaro
and his pro-reform cabinet plan to tackle the country’s fiscal
imbalances by addressing pension reform, which may be met
with pushback, but remains necessary. We think that effort will
be matched by the privatization of state-owned companies
and auctions of infrastructure and selected energy acreage.
Prime Minister Narendra Modi has defended his incumbency
after taking the country through tough reforms such as
demonetization and a goods and services tax. We believe the
reelection of the Modi government is positive for India because
the country can continue the reforms laid out in his first term.
Ivy Live: Ivy’s Midyear Outlook: Rates, risks and rallies
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The opinions expressed are those of Ivy Investment Management Company and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current
through July 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
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