Under the Federal Reserve's decision to maintain a near zero short-term interest rate outlook, many investors are now turning to emerging markets for growth potential. Though this could be either good or bad depending on how you look at it, there may not be much of an opportunity cost as long as inflation stays in check right?
Investors are looking for value in countries that have experienced growth despite the COVID-19 pandemic and are investing in China, South Korea, Japan, Taiwan and India. After experiencing a sharp decline in 2020 of 6.2% (South Korea) and 5.8% (Japan), these countries’ performance is projected to continue at a steady pace into 2021; projections show Japan with 3.2% growth while South Korea could see 8.6%. The WSJ reported that China's recovery will boost the global stock value by about $5 trillion once fully recovering from its losses due to COVID-19
As emerging markets tend to react pretty strongly towards bad news, all eyes are on how India surfaces from a tough battle with COVID that has led to some production problems while China reports rising prices for the raw materials needed in manufacturing. The US Federal Reserve insists that these price increases are only temporary but many countries have been feeling the pressure of prices being higher for everything from steel and lumber to agricultural products.
The intersection of opportunity
The popularity of emerging markets is on the rise, with interest rates staying relatively low––but there are also a number of risks associated with these regions. Every investor should maintain some exposure to emerging markets, but this year looks especially volatile as stimulus packages come into effect around the world. Giving us a tradable opportunity