EM BY EM #10 2021 in reverse: Will EM Central banks outsmart DM’s once again?
2021 will be remembered as a great policy error year at the FED and the ECB. But other central banks saw the inflation coming. Will they be in front of the curve again in 2023?
EM’s are often looked down on due to their weak institutional framework and unpredictable nature. Pension funds and long-only would only chip in if they are well-covered, and many traders looking for small moves often have traumatic positions on their record- if they indeed ever dipped their toe in the unknown waters to start with that is.
To perform consistently in a volatile environment it’s crucial to get the big moves right- and since local idiosyncracies tend to drive the prevailing narratives on the back of global macro, specialization in local affairs is usually a necessity- a resource in limited supply. But from a larger perspective, EM’s are led by flows- and while liquidity was loose flows followed suit. See the Bloomberg EM liquidity index here for context:
Find out how we prefer to position in EM’s at the bottom, 14-day trial below!
Chart 1: EM flows vs EM Bonds and EM Equity ETF’s
2021 will be remembered as a great policy error year at the FED and the ECB. But other central banks saw the inflation coming. Will they be in front of the curve again in 2023?
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