We think the future for most emerging markets is brighter than generally believed. Their poor performance has been a function of close ties with troubled China, heavy reliance on exports of commodities that China consumes, and perceived vulnerability to tighter US monetary policy. However, we think China is on the road to recovery, the tide has now turned for commodity prices, and while the Fed is likely to tighten by more than most expect, the low valuations of many emerging market assets should provide some cushion on the downside. Overall, we think the prospects are typically better for them than for their developed market counterparts.
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