We have previously highlighted our preference for Emerging Markets over developed markets ex US, heavily weighted by Europe and the UK, as measured by the MSCI Emerging Markets and EAFE equity indexes, respectively. (See our previous feature – Shifting Winds). Over the last year, Emerging Markets have rallied strongly followed more recently by Europe. A notable exception, however, has been the UK which has failed to follow their leads. The unambiguous reason is Britain’s decision to leave the EU, known as Brexit, with its harmful impact on economic growth resulting from a reversal of the long-standing open markets policy.
Notwithstanding a brighter outlook for Europe following the French elections, we continue to favor Emerging Markets over EAFE. A key reason is not just Brexit’s profoundly negative impact on the UK itself but the region as a whole. In contrast, innovation and greater openness have characterized Emerging Markets led by China.
This article is distributed for informational purposes only. All information contained herein should not be considered as investment advice or a recommendation of any particular strategy, security, investment product or financial instrument. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.