Emerging market stocks and bonds, which have outperformed most other markets this year, can continue to lead if the dollar doesn’t strengthen, according to a recent investment panel at the UBS Global Forum in New York.
“The tightening cycle is now easier, rates are down and the foreign exchange risk is remarkably benign,” said Jeffrey Rosenberg, BlackRock’s chief fixed income strategist. “Global markets have massively outperformed,” he said, noting that the best performers have been priced in local currencies, which have appreciated against the dollar.
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Also supporting emerging market securities, according to the panel, titled “Investing in the ‘New’ New Normal,” is a decline in geopolitical risk.
“There’s more geopolitical risk in the U.S. and Europe than there is in emerging markets,” said Tom Goggins, senior portfolio manager at John Hancock Asset Management. But that’s not the case for all emerging markets. “Don’t buy Venezuela … and Nigerian bonds yielding 6.5% are not attractive,” said Goggins.