Analyst Profile – Masha Carey
Throughout the month of March and in celebration of International Women’s Day, we are highlighting female analysts and PMs who are critical to Cambiar’s success.
What’s an investment theme you are focused on in 2021 and why?
This year has some exciting reasons to be enthusiastic about emerging market stocks for the first time since 2017. Emerging markets tend to do well in the combination of a steepening yield curve environment and weak U.S. dollar – that is, when the markets are in a risk-on mood. We saw this beginning in late 2016 when these stocks embarked on a strong run after the election, and which continued over the entire course of 2017 as global growth took off. Even Europe’s GDP growth was surprising to the upside during this time, and unloved cyclicals such as European banks outperformed. Unfortunately, a mix of policy maneuvers choked off the positive environment in 2018. The first major factor was the trade war, which spooked global growth; and the second, the Federal Reserve’s pre-emptive quantitative tightening which continued throughout 2018. This combination of factors contributed to a risk-off environment that made emerging markets the last place you wanted to be all through 2019 and of course 2020 as well.
2021 will be an exciting environment for international and especially emerging markets for several reasons. The first factor here is the enthusiasm accompanying continued vaccine distribution efforts. We are also seeing the crucial combination of easy monetary and true easy fiscal policy with the passage of large stimulus programs worldwide following years where austerity was king. We’ve also seen a weakening dollar as risk sentiment comes back into the market, and the well-documented steepening of the U.S. yield curve is another signal that we are set up for an environment where emerging markets should be poised to do well. Moreover, in August 2020, the Federal Reserve moved to a lower for longer framework of average inflation targeting, which means that despite upward moves in the yield curve and inflation pressures, the central bank is unlikely to move to a sustained phase of tightening any time soon. Overall, we are in a truly interesting market set-up going into the global reopening of the kind not seen in some years, which should give some momentum to previously-unloved stocks in emerging geographies.
Learn more about Masha Carey.
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