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Having started 2020 on a firm footing with expectations of a pick-up in global and EM growth and a pause in the US China trade war, the outlook and performance for many asset classes, including EMD, has been upended. The shock to the global economy brought about by the spread of COVID-19, along with the extreme drop in oil prices (WTI down -66% over Q1) have led to a significant increase in volatility and a sharp sell-off in risk assets, many of which rapidly reached levels not seen since the global financial crisis. Coordinated and aggressive easing measures by almost all developed market (DM) and emerging market (EM) central banks have since alleviated liquidity pressures in most parts of the market.
The negative returns in EM Local markets were driven immediately through the repricing of their currencies as investors rushed to the safety of the US dollar. For EM Hard Currency, the strong rally in US Treasuries was quickly overshadowed by the violent widening in EM Hard Currency spreads and a complete evaporation of market liquidity. The sell-off was also accompanied by very significant outflows from EM bond and equity funds alike, putting further pressure on valuations.
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.
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