MarketWatch: "The negativity on emerging economies is rather quite stunning, and to some extent justified. Social unrest in Brazil, an engineered credit crunch in China, deep concerns over India, and the potential that we are closer to raising rates than anyone else has caused money to flee those countries which once were considered the only place to be for those seeing returns."
However, what is most forget is that if its in the news, by definition it’s already old. It has happened. The market may have already discounted the worst-case scenarios, and overreacted to growth concerns. This is what is so often forgotten. Some of the best trades happen amongst utter despair and panic. I have seen many on Twitter make the argument that emerging markets are more likely to be a source of crash risk, given how leveraged these economies are, and how tied they historically have been to commodities which have been extremely weak.
This certainly can happen, but the contrarian in me says maybe the opposite happens. Perhaps emerging markets can be a reason for risk sentiment to cause another leg higher in global stocks.
