A lack of clarity surrounding trade tariffs and US Federal Reserve policy has contributed to heightened uncertainty, presenting risks and opportunities for emerging market equity investors. In this video commentary, Portfolio manager, Arjun Jayaraman, and senior research analyst, Ryan Myers, discuss drivers of recent performance and the outlook for Causeway’s Emerging Markets (EM) Equity Strategy.

 

Key insights

  • Causeway’s EM equity strategy seeks stocks with attractive value, growth, and momentum characteristics as well as favorable macroeconomic conditions.
  • Small cap stocks' underperformance has been a strategy headwind, but the resulting compelling valuations and attractive growth prospects leave us optimistic about the outlook going forward.
  • While stocks with attractive momentum characteristics have lagged recently, momentum has tended to rebound from periods of underperformance as market uncertainty subsides, and the factor continues to provide a hedge against value, our largest factor exposure.
  • Trading at a significant discount to growth stocks, EM value stocks present a compelling opportunity looking forward.
  • Domestically oriented companies, which should be more insulated from US-China trade tensions, comprise the majority of the portfolio’s China exposure.
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