Economic Update September 2018
Summary
Emerging market tensions rattle markets
Concerns of emerging economy dislocation, currency depreciation and equity sell offs took much of the global market’s focus over the past month. This was particularly true as trade tensions between the US and China drifted somewhat over
recent weeks ahead of a likely re-intensification. Looking ahead, however, speculation will increase as the prospect of US$200bn of tariffs being imposed on Chinese imported goods to the US hoves into view.
Global: EM & DM Equity market total US$ returns
EM equity market sell off defines 2018 as DM recovers
Source: IFM Investors, MSCI, Macrobond
Emerging markets (EM) have turned a very sharp corner over the past year, with tighter US financial conditions taking their toll. This is in the wake of the US Federal Reserve (Fed) increasing its policy rate and the US dollar (US$) strengthening.
Looking back, for many emerging economies, 2017 was a stellar year. Investor interest and strong capital inflows were encouraged by solid, and in some cases, recovering and accelerating economic growth, ample global liquidity and low volatility.
This fostered an environment that prompted strong investor sentiment that was seeking to take advantage of the synchronous upswing in global growth that emerging markets, amongst the many, were benefiting from.
Indeed, for the 2017 calendar year, emerging market equities returned 38% gains in US$ terms, making the asset class the year’s top performer. In second place, developing market equities returned 26% and, in outright third, US equities returned
22.0%.
About the author
Chief Economist
Alex Joiner, PhD
Joined in 2016
Bachelor of Economics (Hons) (Latrobe University), PhD (Econometrics) (Monash University).
Alex is IFM Investors’ Chief Economist and has more than a decade of experience in the field. He is responsible for the firm’s economic, financial market and policy analysis and forecasting. Alex is also a member of the firm’s Investment Committee. Prior to joining IFM Investors, Alex was the Australian Chief Economist for Bank of America Merrill Lynch. In this role, Alex was responsible for providing economic insight and forecasts across asset classes and conveying these views to both domestic and global investors. Alex was also previously a Senior Economist at the ANZ Bank.