Emerging economies have been struggling lately, in a world where the dollar is rising and where the White House wages a global trade war. The strength of the dollar tightened financing conditions for companies and emerging countries, while the policy of tariff barriers has slowed down world trade.

In this context, US growth continued to run at full capacity thanks to the accelerating effect of Donald Trump's tax policy. So the Fed continues to raise its rates. And so the dollar continues to strengthen.

This fundamental movement made collateral victims of emerging economies. Not only countries considered very fragile such as Argentina or Venezuela have been affected, but also economies considered more robust, such as South Africa or the Philippines.

However, some analysts anticipate that emerging economies could soon be in investors' good books again. In a new report, Goldman Sachs Asset Management states that US growth is likely to moderate from the strong pace in the second quarter and converge somewhat with the rest of the world.

Goldman believes that economic fundamentals in most EM countries remain healthy, creating fertile ground for a comeback in EM assets. “ We think the recent US performance, combined with softer growth in many economies, has been an underappreciated factor behind asset performance in general in recent months (..) We therefore see the shift to convergence – with US growth moderating while other economies stabilize – as significant. We think EM assets will be the clearest beneficiaries, supported by our view that market fears of trade tension and EM contagion are likely to prove overdone.”
 

Source: Goldman Sachs Asset Management