On Trump's "first day," Emerging Markets faced difficulties, setting several records.
The opening price of the MSCI Emerging Markets Index based on expected PE is 46% lower than the S&P 500 Index, marking the largest gap since Obama's first inauguration in 2009; the average yield of local currency bonds in Emerging Markets is also lower than the yield of USA Treasuries. Analysis indicates that due to USA policy actions, a strong dollar, and high USA interest rates, Emerging Markets stocks are underweighted by investors.
The "big trouble" Trump is coming, and Emerging Markets stock indices have fallen into a Range adjustment.
As of this Thursday, the MSCI Emerging Markets Index has dropped 10% from its high three months ago. According to Bank of America, during the week ending November 13 of last year, following the USA elections, there was a total outflow of 7.5 billion USD from Global Emerging Markets Stocks Fund, marking the largest weekly outflow in a decade.
As fears around Trump rise, the trends in Emerging Markets MMF and Gold diverge.
Amid expectations of Trump possibly returning to the White House, the 30-day correlation between Gold and the MSCI Emerging Markets MMF Index has dropped to its lowest point in nearly three years. Over the past three years, these two Assets have been positively correlated 86% of the time, but now they are experiencing a 30-day negative correlation, which has occurred for only the fifth time in three years.
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Trump's 2.0 policy supports the strength of the dollar, while emerging markets face a double blow in both stocks and currency.
The MSCI emerging markets stocks index fell by 0.8% at one point, marking its fourth consecutive day of decline, setting the longest losing streak in three weeks.
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Traders reduce bets on Trump trades as emerging market assets rise.
As traders reduce their bets on Trump's victory, emerging assets surge significantly.
Global money market funds have attracted over $20 billion in inflows for three consecutive weeks, while demand for stock funds has cooled down.
Global currency market funds have attracted inflows for the third consecutive week.
HSBC: In 2024, the issuance of bonds in EMEA emerging markets is expected to reach a record high.
jpmorgan expects that although the November US presidential election and escalating tensions in the Middle East may cause market volatility, this year the bond issuance volume in the emerging markets of Europe, the Middle East, and Africa (EMEA) will reach a record high.
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