Emerging Markets
Investors should buy protection against further volatility. The shakeup in early August was a taste of things to come. The US election is a pivotal moment in modern history that will drive up uncertainty, while other countries take advantage of US division and distraction.
The current Fed easing cycle will likely be a “buy the rumor, sell the news” phenomenon. The basis is our expectation that the US economy is heading into a rough landing. The primary driver of EM currencies is not US interest rates but the global manufacturing cycle.
Multinationals are attempting to expand their supply chains beyond China, but the relocation process has been slower than expected. In the coming years, however, geopolitical tensions, changes in China’s business environment, and rising competition from Chinese producers could accelerate multinationals' departure from China.
