Whilst Emerging markets have underperformed the S&P 500 year to date, the difference has only been marginal. Which is not what many investors expected.
In times of crises, risk-off sentiment usually drives investors away from Emerging Markets and towards 'safe-haven' developed markets, government bonds and gold.
On this occasion, many emerging markets have proved resilient against a challenging backdrop, especially given the headwinds coming from the US: A strengthening US dollar, US Yield Curve inversion, soaring 30-year mortgage rates impacting the housing market, and tighter fiscal policy squeezing consumers. And the tensions between the U.S and China, which has not been helped by Xi Jingping's stance on the Russia-Ukraine situation.
So what is driving Emerging Markets resilience, and specifically, which countries are potential beneficiaries of the current market dynamics?