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The Dollar and Emerging Markets
By Advisor Perspectives
Capital Markets, Financial Services
- The value of the U.S. dollar has climbed since April, and its rise has been one of the biggest drivers of asset performance in 2018. The stronger dollar is both a consequence of, and catalyst for, tighter financial conditions.
- The impact has been felt most severely within emerging markets (EMs), although escalating trade tensions have played a role in EM performance. As a result, EM assets have cheapened considerably year-to-date. But rising dispersion underscores the need for selectivity, in our view.
- We now see limited upside for the U.S. dollar and expect currencies to remain stable for the rest of 2018 barring a material escalation of trade risks.
- We are constructive on EM equities, with a preference for EM Asia. We see cheap EM valuations, strong earnings growth, and investor underpositioning supporting inflows and equity performance for the remainder of 2018.
Read more at Advisor Perspectives.
Photo: Ervins Strauhmanis