Checklist For Overweighting EM Stocks

Conditions are not yet in place for going long EM stocks in absolute terms and upgrading their allocation from neutral to overweight relative to global equities. The broad trade-weighted US dollar will likely rebound in the next three-to-four months, and global trade will contract. The recent weakness in the US dollar is driven by the narrative that the Fed’s easing cycle is bearish for the greenback, but we believe this thesis is flawed.