EM got hit hard last week by risk-off sentiment that picked up in the wake of the FOMC meeting. Like the recent ECB decision, markets are rightfully focusing on the global growth implications of the dovish central banks rather than the liquidity implications. The US yield curve briefly inverted last week. If sustained, it would signal a likely US recession in the next 6-24 months. This is hardly conducive to risk and EM assets, which we see remaining under pressure this week.
Win Thin is the Global Head of Emerging Markets Strategy and has over 25 years of investment experience. He has a broad international background with a special interest in developing markets. Prior to joining BBH in June 2007, he founded Mandalay Advisors, an independent research firm that provided sovereign emerging market analysis to institutional investors. Prior to that, Win was a vice president and international economist, covering major emerging markets in Asia and Latin America for Alliance Capital Management
EM went along for the ride last week as risk sentiment got a huge boost from the Fed’s QE and the passage of the US Senate-led stimulus bill. This week, improved China PMI readings for March may help the risk rally extend for a bit. Yet the economic toll will still be large as more and more countries go into lockdown. When the scope of the downturn becomes better known, we believe risk sentiment…
Mar 30, 2020
EM and other risk assets are likely to remain under pressure this week as the impact of the coronavirus continues to spread. Germany and Italy announced more severe restrictions on gatherings and travel. Reports that the Republican Senate-led aid bill has stalled due to Democratic resistance hasn’t helped matters, nor have increasingly dire estimates of the potential Q2 contraction for the US.
Mar 23, 2020
Market sentiment is likely to open this week on an upswing after the Fed’s emergency rate cut and expanded QE were announced Sunday afternoon local time. Yet as we have seen time and again this past couple of weeks, added stimulus has had little lasting impact on markets as the virus numbers continue to worsen. Europe is now reporting more daily cases than China did at its peak. We remain…
Mar 16, 2020
Risk-off sentiment continues to build as the coronavirus spreads and so EM is likely to remain under pressure. Oil prices are down sharply after Saudi Arabia and Russia were unable to agree on output cuts, leading the former to flood the market with low cost oil. There will be a lot of collateral damage, including EM producers, DM producers, and US shale producers.
Mar 9, 2020