The new world: Seven factors driving emerging markets post-Covid

Driving forces examined

Earlier this year, we suggested that the policy response to the Covid-19 crisis would lead to a strong rise in global money growth, in turn suggesting strong economic growth in late 2020-21.

The subsequent monetary pick-up has exceeded expectations, raising the prospect of a full-scale boom in 2021 with an accompanying inflation pick-up. Emerging market (EM) equities would be expected to outperform in such a scenario. The key monetary indicator used for economic forecasting here is the six-month change in real (i.e. inflation-adjusted) narrow money in the G7 economies and seven large emerging economies (the "E7"). Halloween: Trick or treat from the emerging markets? This was at a modest level entering 2020 but surged over February-May, reaching the highest level on rec...