Emerging Markets Outlook 2018

Our emerging markets outlook for 2018 and beyond is very bullish. At InvestingHaven we believe that capital will slowly but surely rotate out of overly expensive U.S. stocks and will flow into mostly undervalued emerging markets. 2018 could become the year in which this move would accelerate, the tipping point in other words.

InvestingHaven signaled already a long time ago a bullish 2018 outlook for emerging markets. More than 8 months ago we wrote this:

From a contrarian perspective, emerging markets are hugely bullish. Bloomberg, for instance, published right after Trump’s victory some scary charts which show a stampede out of emerging markets. No surprise, as Bloomberg was also already very bearish emerging markets more than a year ago; that visibly has not changed.

In that same article we tipped 5 emerging markets to buy in 2018. So far they have all performed extremely well.

7 months ago we went one step further and listed 3 reasons why emerging markets would be hugely bullish in 2018:

Emerging markets have suffered for too long. The economic and market cycle move from positive to negative and back.

Emerging markets still have significant growth potential in the middle class, infrastructure, consumption, etc. Economically, there is a reason why they are ’emerging’ and not yet ‘developed.’

Emerging stock markets have consolidated for an unusually long period, as seen on the chart below. The longer the consolidation period on a stock chart, the stronger the trend afterwards.

So far what we forecast a long time ago. Let’s focus on both the fundamentals and the chart.

Emerging markets fundamentals in 2018

Emerging markts are thriving off fundamentals as this Bloomberg interview reveals. We agree with the points made in there.

More importantly, however, the undervalued P/E ratio is what has attracted our attention. The chart in this article makes the point, as it nicely compares it with the expensive U.S. markets and the average of all world markets.