Worried about emerging markets? Consider the low volatility factor.

History shows that when EM stocks sell off, US low vol stocks generally outperform

Nick KalivasTime to read: 2 min

Emerging markets (EM) have been turbulent throughout 2018 due to US-China trade tensions, the deleveraging of the Chinese economy, Brazilian political uncertainty, Middle Eastern conflict and Russian sanctions. The recent plunge in the Turkish lira has only added to investors’ jitters. As EM stocks fall, many investors may be looking to US stocks as a hedge against risk. Based on past periods of EM turbulence, I believe US low volatility stocks in particular warrant a closer look.

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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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Emerging market elections in 2018 sow uncertainty

The people will decide — two dozen times

Time to read: 3 min

In the last couple of years, election surprises seem to have been the rule rather than the exception. Great Britain, Germany, Japan and the US are all examples, with these countries continuing to experience considerable fallout from the results. In my opinion, we ain’t seen nothing yet — by the close of 2018 there will have been 24 elections within emerging market (EM) countries. Each brings the risk of significant policy change, good or bad. Markets don’t like uncertainty, so EM volatility has jumped this year. We expect this volatility in emerging markets to continue as the likelihood of election surprises and non-market friendly policies is elevated.

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EM opportunity knocks — what to make of the recent market volatility

Emerging market debt has tumbled, but the macro story remains compelling

Time to read: 4 min

Following two consecutive years of double-digit returns in 2016 and 2017, emerging market (EM) debt1 has had a rocky ride so far in 2018. However, in the view of Invesco Fixed Income, the proximate cause for the recent volatility has been a tightening in US financial conditions, not a deterioration in overall EM fundamentals. Therefore, we believe this EM correction has created the largest divergence between fundamentals and valuations seen in many years, and offers a compelling opportunity to add exposure to EM in local currency debt.

The US dollar has risen sharply

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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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