Why 2024 could be the year for emerging market resurgence

According to Glenn Silverman, RisCura’s investment strategist, “Typically, when the dollar strengthens, emerging markets underperform, and when the dollar weakens, emerging markets rally. Currency weakness in most key EMs has had a significant impact on EM underperformance. However, once the US cuts its rates, the US dollar is expected to weaken, which should then boost emerging market performance.”

One reason for optimism is the potential for interest rate cuts by the US Federal Reserve. Lower interest rates in the US could lead to increased investment flows into EMs, as investors seek higher returns. Additionally, a weakening US dollar could make EM assets more attractive to foreign investors.

The article also acknowledges the headwinds facing EMs, such as China’s economic slowdown. However, it argues that China’s fundamentals remain strong and that the recent stock market sell-off may be an overreaction,. While suggesting that 2024 could be a pivotal year for emerging markets. While there are still risks to consider, the potential for a turnaround is significant.

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