Juggling Experience
One constituency that’s accustomed to political risk is emerging-market investors. They’ve spent the past two years juggling a collapsing oil price, corruption scandals in Brazil and Russia’s disputes with Ukraine and Turkey. Their stocks reflect it: MSCI’s emerging-market index has gained about 10 percent in 2016.
For them, 2016 is business as usual. In fact, some investors are betting developing-market stocks and bonds will be the most resilient to fallout from Brexit and volatility surrounding the U.S. elections, speculating that industrialized nations will keep rates low. More than $18 billion has poured into emerging markets since Brexit, according to a research note published by Goldman Sachs Group Inc. on Tuesday.
“The market is very focused on yield and has taken its eye off other fundamental factors," said Andrew MacFarlane, an emerging-markets credit strategist at BNP Paribas SA in London. "When you’re really eager to get a return on your money, you’re willing to overlook things that you may otherwise look at more carefully."