Rally In Emerging Markets

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Rally In Emerging Markets

Us Economic Weakness Triggers Rally In Emerging Markets

The US economy is going through a tough time, and it can be seen in the stock market as well. However, this weakness has proven to be a blessing for emerging markets.

The flow of funds is now towards the emerging markets, which has caused a bullish rally. Looking ahead, investors believe that party is just getting started and more upside is ahead for the emerging markets.

Us Economy To Slow Down

The shift is fueled by the expectations that the US government policies will have a negative impact on GDP growth. That's why investors are looking at foreign markets - From European bonds to Latin American currencies, everything is being scooped by portfolio managers.

The results already show that EM equities are set to have one of their best rallies since 2019. In fact, the index of developing currencies is already up by 2% in 2025.

Over the last few years, investors have been heavily exposed to US assets. But now the US assets are looking expensive when we look at all the risks they carry. Meanwhile, the emerging markets have started to look very cheap.

Over the past ten years, emerging-market investors have witnessed their fair share of false dawns as rising US stocks repeatedly overtook rivals.

More recently, investors had little incentive to go outside of the US due to the highest Treasury yields in decades, which also caused the dollar to soar, rattling currencies all over the world.

While the shift has already started, it will still take a long time for the US trade to end. One analyst also added that this shift of funds is part of a decade long trend. In fact, it will continue to stay intact and only increase in intensity over the next few years.

This shift will also weaken the US economy even further and will also hurt the value of the US Dollar.

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