Friday, 23 August 2019
While the trade wars are softening global growth, bond yields have fallen further, to negative levels in some cases. The Fed, the ECB, the BOE as well as the BRICs and other EM central banks have shifted towards a stance of monetary easing. Poor returns in cash and bonds are driving flows into risk assets. EM GDP growth as well as corporate earnings growth are superior to those of DMs. Meanwhile PE, P/CF and P/BV relative valuations of EM to DM are cheap and the sharp reduction in bond yields of EM debt have recently made EM Equity Risk Premium exceptionally high relative to history.
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