Investors have naturally welcomed the improvement in economic momentum, pushing risk assets materially higher. Stock markets have rebounded sharply, recouping most, if not all losses incurred earlier in the year.
Following Joe Biden’s election victory in the US and the prospect of much quieter foreign and trade policy, flows into emerging market assets have been particularly strong, especially in equity funds. While there could be many arguments supporting prudence toward emerging market assets, especially the debt overhang weighing on the fundamentals and growth prospects of some of these countries, tailwinds going into 2021 seem prominent with improving demand from the developed world, sensitivity to commodities, higher beta to risk appetite and economic strength in China. These factors should continue to buoy sentiment and, in turn, emerging markets.
Source: Bloomberg, Unigestion. Data as at 30 November 2020.
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