Emerging markets sell off in the second quarter

Trade tensions, macro concerns and a strong US dollar add volatility and possible opportunity

Time to read: 3 min

By any measure, emerging markets (EMs), as represented by the MSCI Emerging Markets Index, had a tough second quarter, dropping 8.7%1 in US dollar terms and significantly trailing developed markets. The underperformance was mainly driven by macro concerns, trade tensions and election uncertainties. Taken together, these had a negative impact on consumer and business confidence, as well as growth forecasts. However, while we don’t expect a quick resolution to these issues, the Invesco International and Global Growth team continues to find attractive EM opportunities through our bottom-up Earnings, Quality and Valuation (EQV) approach.

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Are emerging markets still attractive?

Even after a 34% gain in 2017, we see continuing opportunity in EM this year

Time to read: 2 min

Emerging markets (EM) delivered in 2017, with the MSCI Emerging Markets Index returning 7.1% in the fourth quarter and 34% for the year — outperforming the developed market MSCI EAFE Index in both periods.1 This strong performance was driven by improving economic conditions and stronger earnings. Among the macro positives were a solid pickup in global trade, improvement in external accounts, upward revisions to gross domestic product (GDP) growth, benign inflation and price support for energy and commodities.

Country-specific highlights

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