Outlook for emerging markets in 2018

As we delve into the prospects for emerging markets in 2018, the shadows of monetary policy tightening in the US loom large over the horizon. The impact of a potential rate hike in the US is expected to reverberate through the economies of emerging markets, raising concerns about the implications for investors. Michael Bolliger, Head of Emerging Market Association at UBS, sheds light on the intricate web of global economic dynamics and political uncertainties that will shape the investment landscape in the coming year. Bolliger underscores the historical relationship between US monetary policy tightening and the performance of emerging market assets. He notes that when the US tightens its monetary policy in the backdrop of stable to high growth in emerging markets, the performance of emerging market assets tends to be positive. On the other hand, if the tightening occurs amidst weakening growth in emerging markets, the outcome is less favorable. Bolliger remains optimistic about the growth prospects in emerging markets for 2018, citing examples such as Brazil, Russia, China, and Nigeria, which show signs of acceleration and recovery. Despite the specter of tightening monetary conditions in the US and Europe, Bolliger believes that as long as the growth momentum in emerging markets remains robust, they will weather the storm. The key concern for investors in 2018, according to Bolliger, lies in the realm of global politics. The political landscape, particularly in China and the US, is expected to be a focal point for investors. Bolliger highlights the importance of monitoring China's economic trajectory, emphasizing the country's shift towards modern industries and technology. While China's growth is projected to gradually decline, Bolliger remains confident in the Chinese authorities' ability to navigate this transition without a sharp economic downturn. The gradual deceleration of the Chinese economy is anticipated to lead to some turbulence and volatility, but not a collapse. Amidst these complexities, investors are urged to stay vigilant and adaptable, keeping a keen eye on geopolitical events, central bank actions, and the shifting trends in emerging markets. The road ahead may be fraught with uncertainties, but those who navigate it with prudence and foresight stand to find opportunities amidst the challenges.