Tuesday, January 22, 2019

An opportunity in EM stocks?

The latest BAML Fund Manager Survey shows that institutional managers have been piling into emerging market equities while avoiding the other major developed market regions.

Indeed, there is good reasoning behind the bullish stampede. Callum Thomas showed a series of charts supportive of the EM equity bull case. For one, developed market M-PMIs have been falling while EM PMIs have been mostly steady.

On a relative basis, EM/DM equity performance are showing signs of a long-term double bottom consistent with the double bottom pattern of the last cycle.

The cyclical to defensive stock ratio in EM appear to be bottoming. This ratio led the downturn, could it be signaling a risk-on revival?

Should you follow suit into EM stocks?

The full post can be found at our new site here.

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Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).

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