Why Emerging Markets are Looking Like a Good Bet

(August 2020)

Investors in emerging markets are getting more and more excited about the prospects for the asset class. The big reason why has to do with the US Dollar. Emerging markets are highly sensitive to changes in the strength of the Dollar and tend to perform well when the Dollar is weak. According to Ritholz Wealth Management, between 1974 and 2019, in years when the Dollar rose, foreign stocks on average returned 2%, while emerging markets gained 2.7% versus a 10.8% return for the S&P 500. However, in years where the Dollar fell, foreign stocks rose 18.6% and emerging market stocks returned 22.5% versus a 12.8% rise for the S&P 500.

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