2018 saw South African investors endure their fifth year of equity returns of close to zero, driven largely by an exodus of investors out of emerging markets.
The last month of 2018 saw this nervousness spread to developed markets on the back of fears around the China-US trade war, mounting concern around the US government shut down, rising US interest rates and a slowing global economy. A panicked sell-off ensued, led by the Americans.
Whilst a correction in global markets had been predicted for some time, the speed of it came as a surprise. By all accounts we can expect 2019 to be yet another turbulent year, but could we finally see emerging markets getting some attention relative to the developed world? Valuations from an emerging market perspective certainly look more appetising.
However, it is impossible to predict with any accuracy what lies in store this year, but there are broadly two scenarios that could play out.
The bear case would see US President Donald Trump continuing to fight with the Chinese (and indeed the world).
In addition, more liquidity being sucked out of the system and thus heralding the end of ‘cheap money’ would result in emerging markets being punished further.