Why did our Emerging Markets fund outperform in 2019?
A turbulent year has passed. Despite the volatility and the noise, markets were excellent in 2019. There’s no doubt about it.
Now what?
Local stock markets all over the world reached new heights last year.
The NASDAQ, S&P500, the Norwegian, Russian, Brazilian, Indian local stock indices... They all set new records. However, emerging markets as a whole – despite having a great year – still underperformed the developed world.
Why is that? And how did our DNB fund Emerging Markets manage to strongly outperform in 2019?
2019 started off on an optimistic note
Whilst 2018 was a year to forget for emerging markets, 2019 started off on an optimistic note.
Yes, there were uncertainties surrounding the trade negotiations between China and the US, but the change in tone between the countries in December 2018 carried the markets into the beginning of the year.
Prospects for growth were obviously affected by the trade tensions, but the markets largely ignored the risk of growth downgrades on the positive trade-headlines.
Consequently, emerging markets traded on par with the US for the first few months.
By August the year’s gains were gone
Early May, however, the US again threatened to raise tariffs on China. This not only surprised the market – it caused a tit-for-tat reaction from China, which caused the US to respond by adding tariffs, which caused China to respond by adding tariffs, which caused the US… You get the pattern?
The US threatened to raise tariffs on China and it caused a tit-for-tat reaction.
