Key Takeaways from this Discussion
- This year has been a volatile one for emerging markets investors. The first half was positive for EM equities, but then it turned negative largely due to developments in China over the summer. China saw new regulatory constraints within various industries, including tech and education. Additionally, the pace of recovery has been slower in some emerging market countries outside of China.
- In light of supply chain challenges, tightening by central banks throughout emerging markets, oil price pressures, and Chinese property reform, the ability to be selective in emerging markets can make a real difference in terms of smoother ride access to client outcomes.
- Cyclical sectors that enjoyed strong performance in 2020, including energy and other commodity-sensitive areas, may face a more challenged 2022. Secular growth sectors and companies that can drive sustained high-quality growth may begin to outperform in the year ahead.
- On a longer-term basis, emerging markets equities appear attractive today from a relative standpoint and could outperform, given how much they have underperformed and have yet to benefit from a meaningful recovery. Additionally, strong secular drivers can help fuel the growth of emerging markets in the years to come, including a rapidly expanding middle class demographic.
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