US Election: Impact on Emerging Markets

There’s an old saying that “when developed markets cough, emerging markets catch a cold,” and I think this is no exception.

Some of the sentiment around the Brexit vote, around the US election in November of this year, has to do with skepticism about things like global trade and immigration—both of which are relevant for emerging markets. And when you think about what’s been driving growth in emerging countries, both of those things are important.

So investors are right to want to dissect what the potential implications are of a change in broader political sentiment in the developed world that goes beyond just the outcome of a single referendum or election and questions the underlying growth model of some of these countries.

However, I do not believe that global trade is broken. We are in fact seeing global trade come back. And supply chains become incredibly global across countries and companies in ways that would be difficult to unwind.

It is true, on one hand, that you will see some re-shoring to places like the UK or the US, reversing some of the off-shoring that had been happening. Now that’s already under way. But it’s also true that there are really deeply entrenched competitive advantages that many emerging-markets countries have that go beyond simply low-cost labor and that should allow them to continue to benefit from export growth and therefore should present interesting investment opportunities going forward.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.