In a round-table discussion conducted recently, the chief investment officers of Neuberger Berman agreed mid-cycle dynamics may result in emerging markets proving a better source of value than the US in 2019.
The CIOs stated that as they did not foresee a major global slowdown on the horizon, alongside the fact that Italy, England and Germany will each experience political and/or economic policy overhauls in 2019, emerging markets are looking appealing for investors.
“The risks are real,” said Joseph V. Amato, president and chief investment officer of equities at Neuberger Berman.
“Overall, however, it supports the case for tilting towards emerging markets and Japan over Europe when looking for risk exposure outside of the US. If you accept that recession probability is low in 2019, and if Europe gets through the year unscathed, you could stand to benefit through emerging markets without so much exposure to the potential downside risks.”
Risk assets in particular were pinpointed as an area of growth for the emerging markets, as performance is picked to reconverge with what was seen from the US in 2017 and 2018.
Lastly, current uncertainties surround oil prices were deemed not to be a long-term risk, with future upside predicted.
“Overall, the developed world plus China is a net user and the emerging world is a net supplier, as a rule of thumb,” Mr Amato explained.
“Subdued oil prices, and therefore, subdued inflation and a weaker dollar, could support non-US recovery and convergence.”