I had the privilege of being on the Bloomberg set with Tom Keene and Francine Lacqua earlier today. Lakshman Achuthan, co-founder of ECRI also joined us for the discussion.
This 6.5 min video clip captures the essence of the discussion. The US dollar was rallying against all the major and most EM currencies. The second consecutive quarterly economic contraction in South Africa pushed the rand down the most in the EM space, but Turkey was also under pressure. India’s rupee also fell to new record lows.
I tend to emphasize the policy mix, rate differentials, trade tensions, and idiosyncratic (policy mistakes) as the main driver. Achuthan emphasized the weakness in the global manufacturing, for which many emerging markets are particularly sensitive. It is difficult for me to envision a strong recovery in emerging markets as an asset class until investors feel more comfortable that the Fed’s tightening cycle is complete or nearly so.
Click here to view the clip.