See, there is a V-shaped recovery, it’s just not necessarily happening in the U.S. or Europe.
In a strategy update, Morgan Stanley’s Rashique Rahman highlights an increasing divergence between economic indicators for emerging markets vs. G7 nations, even pointing to Korea as a lead indicator for emerging market strength.
We’ve thus hit an inflection point whereby developing economies have begun to drastically outperform their developed nation peers. Hopefully they can help pull us out of the mud.
Morgan Stanley: We note that manufacturing surveys and IP are showing stronger upward momentum in emerging economies of late relative to developed economies. Return correlations – between EM and developed markets – have started to decline as a result. Should these trends continue, we should see return correlations decline further, providing scope for compelling risk-adjusted returns for EM versus developed markets.
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