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Rising Protectionism Is Key for Emerging Market Stocks

Aaron Levitt Sep 05, 2019


When interest rates are low and access to cheap money is plentiful, investors generally load up on risk assets. That’s the general consensus for long stretches of time. As the Federal Reserve and other central banks lower interest rates, assets that are somewhat riskier tend to do well – this has included emerging markets. Historically, emerging world nations have performed well as the Fed has cut rates. So, with Jerome Powell & Co. now cutting rates, emerging market stocks should be rallying.

But, oddly, that’s not the case this time around.

Emerging markets are falling by the wayside. The culprit could be rising protectionism in the United States and around the world. With the U.S./Chinese trade war and other such skirmishes now commonplace, the normal easy-money relationship may not be all that accurate. And in that, it might take a different approach to the success of emerging markets – one that uses dividends.

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