A Tough Year: 2018 Emerging Markets Performance

By Patricia Ribeiro & Nathan Chaudoin - January 2019

Introduction

During much of 2018–particularly Q3–exogenous events dominated emerging markets (EM) equity performance. Market leadership was defined less by earnings and instead by geopolitical concerns and U.S. dollar (USD) strength. Such a market environment, which runs contrary to our approach, drove our 2018 underperformance.

While last year’s market environment was challenging, we believe it created a substantial dislocation between stock price and company earnings, giving rise to opportunities heading into 2019.

2018 Market and Performance Review

Last year was a tough year for emerging markets. After gaining more than 8% in January, the backdrop quickly deteriorated, and EM struggled for the remainder of the year. Pro-cyclical fiscal expansion in the U.S. drove the U.S. Federal Reserve (Fed) to hike rates and strengthen the USD. This, combined with a protectionist tilt in trade policies, put pressure on EM. Add the specific domestic political challenges in countries such as Turkey and Argentina, and we got the market turmoil of 2018.

Patricia Ribeiro
Sr. Portfolio Manager
Nathan Chaudoin
Nathan Chaudoin
Sr. Client Portfolio Manager

A Tough Year: 2018 Emerging Markets Performance

January 2019 | Notes from the Emerging Markets Equity Desk

Download PDF
  • Related Articles
  • More From Author

10 Things Investors Should Know about the China A Market

A-shares are shares of mainland China-based companies that are traded the Shanghai Stock Exchange and the Shenzhen Stock Exchange in local currency. The addition of these shares to MSCI's widely followed indexes is expected to spur billions of dollars in foreign investment in the Chinese market.

Large Cap Growth: Ignoring Near-Term Impacts

Now more than ever, it is easy to get distracted by daily news flow. Between attention-grabbing headlines and the viral nature of social media, the news can be a lot to absorb. Our Premier Growth strategy team, however, remains focused on investing in competitively advantaged companies.

Tariffs and Trade Wars: How Will Emerging Markets Fare?

The recent negative equity market response—despite limited economic exposures—reflects how markets are trying to price in the risk of escalated US protectionism, rather than any specific tariff. We believe the steel and aluminum tariffs will have a limited impact on emerging markets.

    Tariffs and Trade Wars: How Will Emerging Markets Fare?

    The recent negative equity market response—despite limited economic exposures—reflects how markets are trying to price in the risk of escalated US protectionism, rather than any specific tariff. We believe the steel and aluminum tariffs will have a limited impact on emerging markets.

    Emerging Markets: Not a One-Size-Fits-All Approach

    Portfolio manager Patricia Ribeiro takes an active approach when evaluating the 24 diverse countries of the emerging markets universe.

    Reports of the Death of Emerging Markets Have Been Greatly Exaggerated

    Nine months ago, investors anticipated challenges for emerging markets. Turns out, there were reasons to be optimistic.

      Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.