A Simple Allocation Strategy for Including EM Stocks in Global Portfolios (The Emerging Markets Investor)

Any investor in emerging market bonds or stocks, unless he or she is a dedicated portfolio manager with a mandate to outperform an EM index on a short term basis (1-3 years), should operate under the following assumptions.

1. “Buy-and-hold” does not work in EM.

2. Risk always trumps valuation in EM stocks and bonds.

3. EM stocks are liquidity-driven trending assets.

4. The U.S. dollar drives returns and is negatively correlated to EM stocks and bonds. READ MORE

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