Emerging Market equities are finally getting some love after a big sell-off since Donald Trump won the presidential race.
Goldman Sachs says the spillover of reflation – set in motion on expectations of higher inflation and growth under a Trump presidency, besides a stronger dollar – has been harsh on emerging markets, with the carry trade partially to blame.
“In short, we have argued that the initial underperformance of EM assets is more related to the unwinding of carry trades rather than a true repricing of lower EM growth prospects owing to higher rates,” the bank said in a research note Nov. 22.
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