A Bloomberg survey of 63 investors, strategists and traders found
the efficacy of coronavirus vaccines is likely to be the biggest market driver
for next year.
Emerging-market
watchers may be confident the rally will continue into 2021, but it’s the
roll-out of vaccination programs that concerns them the most.
A Bloomberg survey
of 63 investors, strategists and traders found the efficacy of coronavirus
vaccines is likely to be the biggest market driver for next year, beating out
worries about the fiscal laxity of governments and China’s economic growth
path. China still emerged as the overwhelming favorite across currencies and
stocks, while investors were most optimistic for Latin American bonds, the Nov.
18-25 poll found. Argentina remained a source of unease.
The findings
underscore how the battle against the Covid-19 pathogen turned markets on their
heads in the past 12 months, forcing investors
to throw out the playbook and look for fresh cues for the direction of asset
prices. After collapsing in the first half, emerging markets have rebounded to
hand investors more than $5 trillion in wealth this year largely as vaccine
breakthroughs supported risk assets. Bonds have climbed to near record highs,
while benchmark gauges of stocks and currencies are at their strongest levels
in more than two years.
“As economies
reopen, vaccines are distributed and risk appetite returns, 2021 could be a
break-out year for emerging markets, especially if the U.S. dollar continues to
weaken,” Christopher White, a London-based co-manager of the emerging markets
discovery fund at Somerset Capital Management LLP. “An unprecedented U.S.
peacetime fiscal deficit combined with aggressive monetary stimulus is putting
pressure on the dollar, which is very helpful for many emerging economies.”
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