Emerging markets are likely to lead the way
China is leading the way in the global trade recovery
On a year-over-year basis, global exports for the five largest exporters in the world look to be improving, with China leading the way. The global trade outlook for 2021 is the strongest in two years. Improved YOY export growth in China and South Korea should be shared by the United States, Japan, and Germany through 2021.
Year-over-year export growth by country
2013 ‑ current
Source: Manulife Investment Management, Bloomberg, as of as of February 28, 2021.
Asia equities may benefit from stronger economic growth.
In their April World Economic Outlook, the International Monetary Fund projects that many regions around the world, especially emerging and developing Asia, could grow faster than the U.S. in 2021 and 2022. The improving economic outlook should benefit all regions lead by the emerging markets.
Economic growth projections
Source: Manulife Investment Management, International Monetary Fund, as of March 23, 2021
Copper prices indicate an accelerating Chinese economy
As China is the largest importer of copper, an increase in the price of copper is usually tied to an increase in demand from China. Due to its broad use throughout various industries, the price of copper is often seen as good indicator for the health of the Chinese economy. Despite the recent slow down in year over year growth in the price of copper, the current level remains supportive of economic growth in China.
Chinese imports vs Copper prices YOY change
2007 – current (with six‑month forward forecast)
Source: Manulife Investment Management, Bloomberg, as of November 30, 2020.
Emerging market equities look attractive in 2021.
Emerging market equities enjoy their best performance in an accelerating growth and inflation environment. Coupled with our viewtowards a weaker U.S. dollar through 2021, we believe emerging market equities have the potential to outperform developed market equities this year.
MSCI Emerging Markets Index vs. DXY Index2000
2000 – current
Source: Manulife Investment Management and Bloomberg, as of March 31, 2021.
Manulife Investment Management’s sample strategy
• Favour a selective approach to Canadian equities.
• Consider diversifying business risks, not just sectors.
• Look for opportunities to take advantage of market dislocations.
• Consider dollar‑cost averaging into equities.
International developed market equities
• Consider less constrained strategies that can seek out opportunities wherever they may present themselves.
Emerging Market equities
Opportunities may exist within the emerging markets, specifically in the Asia ex‑Japan region.
• Favour flexible strategies that can seize opportunities wherever they may be.
•Consider using different types of bonds for different objectives, whether it is downside protection or enhanced yield.
•Be mindful of the potential currency impact on global allocations.
Source: Manulife Investment Management as of December 31, 2020. For illustration purposes only. Performance histories are not indicative of future returns. The information in this document does not replace or supersede KYC (know your client) suitability, needs analysis or any other regulatory requirements. Clients should seek the advice of professionals before making any investment decisions.