US election implications for emerging markets: down but not out?

EMERGING market (EM) assets have suffered in the wake of Donald Trump's victory in the US presidential election and the Republican sweep of Congress. Investors should remember that there is still much uncertainty around Mr Trump's policies and thus should not overreact until there is more clarity on political appointments and specific policy proposals.

The impact on emerging markets will depend on the policy mix that is ultimately implemented, in particular, whether only more pro-growth aspects of the agenda are emphasised or whether more restrictive trade and immigration policies are prioritised as well. The policies will dictate the pressure on US yields and the US dollar, and thus how much headwind emerging markets face from external macro factors.

Pro-growth agenda