Much of the deceleration is due to China, where the slowdown could undercut industrial commodity prices. As a result, the rally in developing-nation stocks will probably "fizzle out" and the MSCI Emerging Market Index will end the year "slightly lower" on a U.S. dollar basis, the firm said last week.
The Capital Economics prognosis for 2019 is even worse: 4 percent growth. Prices will "fall sharply in 2019 as the U.S. stock market tumbles."
4) Overbought Stocks
Goldman Sachs Group Inc. says records for global stocks imply a higher risk for a market retreat. The firm notes that the MSCI Emerging Market Index is on its longest-ever streak without a 10 percent correction.
“So far this year, risk appetite has picked up materially, nearing its all-time high, led by equities,” Goldman analysts including Ian Wright said in a note.
Still, it’s unlikely that losses extend into bear territory, according to the strategists, who remain overweight on emerging-market equities.
5) Inflation Spike
An unexpected sharp spike in inflation within mature markets could be "a game-changer" for emerging-market equity flows, according to Emre Tiftik, the deputy director of global capital markets at Washington-based Institute of International Finance.
Although not his base case, it would probably spur tighter global financial conditions, potentially reducing U.S. dollar liquidity and adversely affecting developing-nation stocks. Tiftik says the IIF remains constructive on emerging markets for now and forecasts non-resident portfolio equity flows rising to more than $150 billion this year from about $70 billion in 2017.
This article was provided by Bloomberg News.