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The pause that refreshes

Weekly investor research

02 October 2017

Volatility is your friend, especially if you are looking to increase your Emerging Markets (EM) allocation. The prospect of US tax cuts and Fed hikes impacted sentiment towards EM last week, but we do not expect them to derail the EM recovery, which has solid backing in valuations, technicals and fundamentals. As such, we suggest that investors ruthlessly exploit such bouts of volatility to add to their EM exposure at marginally more attractive entry levels. Brazil’s fiscal numbers are now improving due to recurring tax revenues, Argentina is growing and China prepares to reform state-owned enterprises. The Global Backdrop section explains why the Fed is dovish even when it points to a hike in December, examines the latest trade conflict between the US and UK and ponders wisdom deep and clear about North Korean hope and fear.

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