Friday, January 31, 2020

BlackRock: "The U.S. dollar and emerging market assets"

We aren't there yet.
Over the last three years there have been so many calls that "Now is the time for emerging markets" and "Now is the time for value stocks" and "Now is the time for small caps".
But it wasn't the time for any of that.
And it may take a sustained downturn in U.S. large-cap growth before it really is the time.

That said, here BlackRock's Mike Pyle, Global Chief Investment Strategist for BlackRock, January 30:
Mike shares our view on the U.S. dollar, and how it supports our preference for emerging market assets. 

Two broad forces drive the U.S. dollar’s moves: monetary policy differentials and risk appetite. We see the U.S. dollar stabilizing or somewhat weakening over the next six to 12 months due to shifting dynamics within each of the two forces. Most developed market (DM) central banks have gone on a pause from monetary policy actions and we still see some room for additional easing in EMs; easing trade tensions should underpin risk appetite, reducing “safe haven” demand for the dollar. Our currency view underpins our preference for local-currency EM debt and equities.
Global trade tensions weighed on global growth and kept investors on edge in 2019. This coincided with a rally in the dollar to near post-crisis highs, as the chart above shows. The dollar, a perceived safe-haven asset, typically attracts interest when geopolitical risks flare up. With the U.S. and China signing a limited “Phase 1” trade deal and a revised North America trade pact passing the U.S. Congress, we see global trade tensions going sideways in 2020. This should support overall risk sentiment – and reduce flight-to-safety demand for the dollar. As a sign of reduced bullish bets on the dollar, speculators had cut their net long position on the currency to the smallest in 19 months as of Jan. 14, according to Reuters calculations and data from the U.S. Commodity Futures Trading Commission....

Also at the BlackRock blog:

Jeff Shen Co-CIO of Active Equity and Co-Head of Systematic Active Equity (SAE) at BlackRock
What now for value stocks?