Economists are suffering Envy of physics..They build complex mathematical models to explain how the economy works, rather than trying to understand how real people react. Economy.. This creates opportunities for investors.
Economist International Monetary Fund Please tell us that problems are expected as interest rates rise. They believe that: “Emerging and developing countries are seeing uncertain rises in interest rates … Currently, capital inflows into emerging markets are showing signs of exhaustion.”
Financial analysts stick to that idea and warn against investing in emerging markets. But history shows that global stock markets, especially emerging markets, can do better as interest rates rise.
Emerging markets follow US trends
The graph below shows that the global stock market may recover in the face of rising US interest rates.
US leads global market
This chart shows the MSCI World Index. This shows that global and emerging markets are highly correlated. Stock market indexes around the world tend to follow trends in US equities in the bear market.
However, rising interest rates have little effect on stock prices. The green shaded area in the graph above shows when the Fed’s interest rates were higher than they were a year ago. The Fed manages short-term interest rates.
In most cases, the rate of increase is consistent with the bull market for equities. Rising interest rates indicate that the economy is expanding. If the US economy expands, so many goods and services are imported by the United States, so many economies around the world will also expand.
The chart has a higher rate everytime Bullish against stocks. However, it suggests that higher rates are not an insurmountable hurdle for the bull market.
Economists disagree and their model shows pain as interest rates rise. But history shows that, as investors, we should almost always ignore what economists say.
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Ignore the Experts on Emerging Markets Source link Ignore the Experts on Emerging Markets
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