Wall Street Investment Banks: Emerging Markets Will Experience a Turning Point, the "Lost Years" Will Come to an End

On May 18, companies such as Morgan Stanley Investment Management, AQR Capital Management, Bank of America and Franklin Templeton are betting that the situation may eventually turn in favor of developing market stocks. BofA strategist Michael Hartnett called them “the next bull market.” AQR predicts that over the next 5 to 10 years, they will return close to 6% annually in local currency, outpacing the 4% gain of US stocks in US dollar terms. The S&P 500’s underwhelming performance for the year, while its emerging-market peers rose 10%, sparked hopes that the disparity between U.S. equities soaring more than 400% over the past 15 years and emerging market equities edging up just 7% could be over. Drivers include a weaker US dollar, volatile S&P indices, and questions about the safe-haven status of US Treasuries. As the Trump administration unleashes a trade war, investors are increasingly looking beyond the United States. Christy Tan, an investment strategist at Franklin Templeton, said she strongly recommended emerging market bonds as an alternative to U.S. bonds, “We don’t think the U.S. market is special for the time being.” ”