Emerging Markets Poised to Bounce Back in 2021

By Debbie Carlson It’s been a tough decade to be an emerging-markets investor, as this sector has underperformed the S&P 500 since 2010. But market watchers say after 10 years of lagging the U.S., emerging markets may finally be ready for prime time as valuations and a rebounding global economy could help the sector. Marcelo Carvalho, head of global emerging market research at BNP Paribas, says although emerging markets still face several risks in the coming months, 2021 could be “a sweet spot” for these countries. BNP Paribas, along with several other economic forecasters, say much of their 2021 outlook is based on effective and safe vaccines. So far several companies, including Pfizer, Moderna and AstraZeneca have announced 90%-plus efficacy in late-stage vaccine trials. It’s a sentiment that’s lifting all markets, including emerging markets, says Pat O’Hare, chief market analyst at Briefing.com. “There’s welling up of expectations that you’re going to get approved Covid vaccines and increased adoption rate of people taking that vaccine, and that gradually, if not suddenly, getting a sense that you’re returning to normal at some point in 2021,” O’Hare says. So if there’s a problem with vaccine rollout or other issues once vaccines are distributed widely, that will change the economic scenario. Additionally, BNP Paribas cautions that a global economic rebound will occur unevenly over time and across regions, and that there will be some permanent economic damage from the pandemic. Still, Carvalho says, they expect interest rates and inflation to be low globally, which underpins a recovery.