Emerging markets continue to be a tale of two worlds in 2024.
While the EM portfolio delivered modest outperformance this period (more on that below), it’s clear that headwinds remain across the board.
From slowing demand in some sectors to continued struggles in energy markets, companies in emerging markets have faced significant challenges. Yet, there’s a growing sense of resilience as selective sectors, such as technology and consumer-facing businesses, show signs of recovery.
Currency volatility has emerged as a key factor this year, driven by the Federal Reserve’s policies in the US, which has cemented the strength of the dollar and put downward pressure on some emerging market currencies. This dynamic creates both challenges and opportunities, as companies operating in export-driven industries often benefit from weaker local currencies.
At the same time, interest rate trends in emerging markets are diverging. Many central banks are lowering rates as inflation remains under control, providing some relief for consumers and businesses alike. However, markets like Turkey and Argentina continue to struggle with entrenched inflationary issues, highlighting the disparities within emerging markets. Thankfully, the EM portfolio remains minimally exposed to these volatile regions, focusing instead on more stable markets.
China remains a focal point and a source of uncertainty. Despite some strong performances from specific companies, the broader market still faces challenges such as a heavily indebted property sector, regulatory unpredictability, and subdued consumer confidence.
These factors weigh on the overall growth outlook, but the EM portfolio’s cautious and selective approach has allowed us to navigate these risks while capturing upside where possible.
Looking at the big picture, the opportunity for alpha in emerging markets is significant, even as the benchmark itself remains under pressure. By staying disciplined and diversified, we’ve been able to position the portfolio for both short-term gains and long-term growth.
With that context set, let’s dive into how the portfolio performed and the trends that shaped this period.
However, if you're new to this strategy and want to see how it works, we highly recommend checking it out: here
But if you're a regular, let's push forward 👇