Emerging Markets

A high US tariff and the lingering uncertainties on the US-India trade deal will hurt investors sentiment. This and contracting corporate profits will push share prices lower. Stay underweight Indian stocks.

MacroQuant is recommending that equity investors keep their finger near the eject button but avoid pressing it for now. The model is warming up to the dollar again and sees scope for oil prices to rise.

Thanks to the tight monetary and fiscal policies so far, inflation and growth are heading lower in Turkey. Buy 2-year local currency bonds, currency unhedged. Also, upgrade Turkey's domestic bonds from neutral to overweight and stocks from underweight to neutral within their respective EM portfolios.

A potential right-wing government in 2027 will not stabilize the trajectory of the public debt-to-GDP ratio. Unsustainable public debt, a large current account deficit, and a sharp growth slowdown will lead Brazilian markets to underperform EM. Yet, to benefit from a quickly decelerating economy, we recommend receiving 2-year swap rates.

In this chartbook, we look at the balance of payments across DM and EM countries. The US does not fare well, but neither do a few other countries.

Economic growth and rapid expansions do not always translate into higher EPS and shareholder returns. One of the key reasons is dilution. We offer a typology of dilution: (1) “offensive”, (2) “defensive”, (3) corporate governance-linked, and (4) idiosyncratic cases.