A TALE OF CYCLES
In our series of ‘Smart Chart’ articles, we dig for overlooked value in emerging and frontier markets, beyond the headlines by focusing on hard data and putting our local perspective to work.
In a stormy world of misleading and spurious news, it is the only way to keep our head on straight and stay on course.
In this short article, we thought we’d share our perspective on the different market cycles that defy the general perception towards the performance of emerging and frontier markets.
The chart below shows us that, during the past 2 decades, there have been 3 main cycles.
We’ll let the chart do the talking (click on it to see a larger version)
I guess we can already draw 2 quick conclusions:
During the past decade, massive monetary stimulus in the US, Europe and Japan has clearly distorted the long term pattern where the fastest growing economies should outperform more established markets.
We also observe another perspective that is not very much in line with general market perception…
The above may surprise you because it challenges a well-established heuristic with most professional investors: “When US interest rates go up, you must sell emerging and frontier markets…”
The data is hinting that this may be more of a myth than anything else!
We have been thinking about this we will take a closer look at this in our next ‘Smart Charts’ article…
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