Global investors are well aware that China, indeed most emerging markets, have had a rough 2018 after a stellar 2017. Chinese markets are about 5% on trade tensions and reports their central bank cutting their reserve ratio – a stimulus measure of monetary easing designed to loosen money flow into an economy that’s stalling.
Winners and losers in the global equity markets rotate. As long as good and bad news continues to cycle, a little bit of reversion to the mean should be expected. However, it has been several years since emerging markets have had their opportunity to shine, so a reversion to US dominance this quickly is unexpected. Analysts continue to note clear advantages to overseas markets – both developed and emerging – in terms of valuations, presumptions of efficiency, dividend ratios, and the likely range of potential improvement. What’s missing from this equation is a catalyst for change – either positive for international equities or negative for US equities.