In times of uncertainty and dislocation, emerging markets often stand in the Crossfire. Given the state of geopolitics and the radical reset of borrowing Costs, the present moment would surely qualify as uncertain and dislocated. Yet in many ways, developing nations face the future in an enviable position.
With emerging countries much further along in their economic cycles, many EM central banks are already embarked on policy loosening.
Monetary policy works with a lag, typically of 12-18 months, so the positive impetus of 2023’s easing could start to be felt in the months ahead. But whenever it materialises, it will likely manifest in the developing world before the US and other advanced economies experience similar effects. As we suggest in our ‘Macro outlook’, the latter may yet have a higher price to pay for the shift into a new interest-rate regime, particularly in terms of growth. On a relative basis at least, emerging markets can head into a new year with some confidence.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.