Trade, geopolitics, and emerging markets were top of mind at the recent annual meetings

While we are constructive on the prospects for emerging markets in the year ahead, we think the real potential lies in individual country and thematic opportunities.

Global central bankers, finance ministers and representatives from the private sector and civic groups gathered in Washington recently for the spring meetings of the IMF (International Monetary Fund)/World Bank Group. With trade policy, geopolitics and emerging markets currently top-of-mind for many investors, the meetings were especially relevant this year.

A recent visit to the United Arab Emirates (UAE), Oman and Bahrain showed just how much the region’s fortunes are still levered to oil prices, despite the efforts of several countries to diversify.

During the second most significant repricing in U.S. Treasury bond yields since 2013, emerging market debt has so far significantly outperformed equity, oil and U.S. Treasury beta.

Emerging markets debt and equity have many overlapping traits, but also differ in their exposure to countries and risks. The MSCI Emerging Markets Index contains 27 countries, with the five largest accounting for 70% of market value. Three countries in Asia - China, South Korea and Taiwan - comprise more than 50% of the index.

Global central bankers, ministers of finance and representatives from the private sector and civic groups gathered in Washington, D.C., last week for the Annual Meetings of the IMF (International Monetary Fund) and the World Bank Group.

Russia has been front-and-center of the news this summer. Yet Western sanctions over Crimea, fallout from the investigation into meddling in the U.S. presidential election and last month’s bailout of the nation’s largest privately held bank have failed to thwart Russia’s emergence from stagflation.

As 2017 progresses and the priorities of the Trump administration take shape, the outlook for emerging markets (EM) has evolved from uncertain to promising.

A recent trip to Moscow on the 100th anniversary of the 1917 revolution revealed not a whiff of revolutionary change in the economy, but rather stagnant growth mixed with structural stability. We could simply call it “stagnant stability.”