Equities face headwinds from the global rising bond yield environment, whose impact is usually felt via de-rating pressure.
A recent report argued that emerging market equities offer a significant safety margin when compared with their developed market counterparts in this regard. EM stocks not only offer long-term EPS growth that is, in many cases, superior to that offered by the vaunted U.S. market, but they also already trade at significantly cheaper valuations.
The catalyst for unlocking this valuation advantage has historically been a global economic and trade expansion, a tailwind which we expect to persist over the next 6-12 months. Overweight EM in a global equity portfolio.
