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20 Jun 2013
Flash: Emerging markets assets lose swagger – Goldman Sachs
FXstreet.com (New York) - Consistent with the analysis of the Economics Research Team at Goldman Sachs, “Five major macro tailwinds, alongside very large risk premia for EM assets, drove the stellar performance of EM assets in the last decade, when they delivered historically high returns and comfortably outperformed their DM peers.
As such, those tailwinds stemmed, to a large extent, from the late-1990s crises and the sharp rise in the growth impulse from China. However, none of the five major macro tailwinds is likely to repeat itself, and some may reverse. Moreover, risk premia in EM assets are generally much smaller, with the possible exception of EM equities. “Over the next decade, EM assets are unlikely to deliver the kind of risk-reward that investors had become used to in the last one and absolute returns will likely be much lower.” rhe team warns.
As such, those tailwinds stemmed, to a large extent, from the late-1990s crises and the sharp rise in the growth impulse from China. However, none of the five major macro tailwinds is likely to repeat itself, and some may reverse. Moreover, risk premia in EM assets are generally much smaller, with the possible exception of EM equities. “Over the next decade, EM assets are unlikely to deliver the kind of risk-reward that investors had become used to in the last one and absolute returns will likely be much lower.” rhe team warns.