Trump election – a spanner in the works for emerging markets

Added 16th November 2016

Emerging market equities and debt have been the most popular asset classes with European investors this year. But now Donald Trump’s election threatens to spoil the party.

Trump election – a spanner in the works for emerging markets

The JPM GBI-EM index, which tracks local currency emerging market government bonds, has fallen by more than 8% since the US presidential election, its steepest fall since the 2013 taper tantrum. Emerging market equities have only tumbled by slightly less.

Foreign investors have also started to pull out the money they had been committing to emerging market assets earlier this year. Since the US election, they have withdrawn some $6bn (€5.6bn) from emerging market equities and bonds, according to the International Institute of Finance (IIF). 

Is this just a blip triggered by initial panic about the possible damage a protectionist president Trump could inflict on export-dependent emerging markets, which could subside if Trump doesn’t turn out all that bad for EM? Or has there now come an end to the positive dynamics that have benefited EM assets for much of 2016?

Maarten-Jan Bakkum, emerging markets strategist at the multi-asset team of NN Investment Partners, believes the underpinnings of the EM recovery that unfolded this year have disappeared just as quickly as they emerged at the start of the year.

Goodbye carry trade

“Emerging markets had been benefitting from the search for yield as developed market interest rates were so much lower, but the carry trade is now off the table. We were overweight in EM local currency but went underweight right after the election. In hindsight, I’m very glad we did that,” he told Expert Investor at a press meeting in London on Tuesday.

The fact that the popularity of emerging markets this year was based on low interest rates in the West and easy monetary conditions rather than on accelerating growth has left emerging markets exposed to a setback once these external drivers disappear. While the reflationary environment that a Trump election has heralded is the initial trigger, the worsening outlook for global trade doesn’t help emerging markets either.    


Kames Income Hub


Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Premier Multi Asset Global Growth - Alex Farlow
Premier Multi Asset Global...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Tjibbe Hoekstra

Senior Reporter

Tjibbe joined Expert Investor as a senior reporter in March 2014. Before moving to London he worked as a financial news reporter for various news outlets in Amsterdam, including Reuters and ANP, the main news agency in the Netherlands. He also worked for Fondsnieuws, a website and magazine for finance professionals in the Netherlands. Tjibbe holds a MSc in Public Administration and a post-graduate diploma in Journalism.



Investment Strategy




PA Dublin October 2017
PA Dublin October 2017

Tuesday 10 October
Westbury Hotel, Dublin

PA US 2017
PA US 2017

Tuesday 17 October
Furniture Makers' Hall

PA Channel Islands November 2017
PA Channel Islands November 2017

Tuesday 14 November
Royal Yacht Hotel, Jersey

PA Alternative Ucits November 2017
PA Alternative Ucits November 2017

Tuesday 7 November 
Furniture Makers' Hall

Sponsored Content