House Mountain Partners

Emerging Markets

Emerging Markets Come Back

Chris Berry


  •  Despite the Fed continuing to taper the pace of asset purchases, it appears that Emerging Markets (EMs) have rebounded from their initial sell off.
  •  Has the crisis “vanished” as Bloomberg recently claimed or is this a lull in a secular downtrend?
  •  There are a number of indicators we can look at, but none are more telling than the direction of currencies and interest rates – higher rates will hurt growth prospects.
  •  Regardless of the “crisis talk”, EMs will continue to lead global growth, albeit at a slower pace than many would like.
  •  Does this, coupled with slow and presumably steady growth in the West augur for higher interest rates going forward? This is anathema to Central Bankers.


Are We Out of the Woods Yet?

In May of 2013 when then-Chairman Ben Bernanke announced his intention to eventually start tapering asset purchases in the United States, Emerging Market equities and currencies were the first, unwitting victims. 

The thinking goes as follows:


The Non-story Surrounding the Death of Emerging Markets

Shelley Chen
  • Recent volatility in emerging markets has many worried that this is the start of a global correction 
  • We do not necessarily agree and believe that new concerns about emerging markets are overblown 
  • The culprit may be the lax monetary policies of central bankers that have bred complacency 
  • The key to interpreting the potential for emerging markets mirrors our strategy for interpreting opportunities in the metals space – selectivity 
  • Several emerging market economies are in better shape with respect to fiscal and monetary policy than the “recovering” developed world economies 
  • Frontier Markets are the new game in town 

The Luck Of The Draw

I’m always the first to admit how fortunate I’ve been in life. I’ve had numerous opportunities to travel to other countries throughout the world, talk to people in all walks of life, and see the world through a non-US prism. Viewing different (and mostly) lower standards of living sparked my interest in the emerging markets and the well known idea of convergence. See Nobel Laureate Michael Spence’s book titled “The Next Convergence”. 

Economic growth in the developed world is slow and volatile, well below “escape velocity” for 62 months. The most recent example is sluggish jobs numbers in the US last Friday (only 113,000 jobs created).