What's Next For Emerging Markets?
The desk interprets Goldman Sachs' commentary on emerging markets, emphasizing the early signs of stabilization noted by Kevin Daly. Amid a recovery signal from the lows of last year's financial performance, the commentary suggests key factors previously hindering growth are now reversing, particularly in the CEEMEA region. This perspective is underpinned by the acknowledgment of Turkey's long recovery path, yet positive long-term growth remains in sight, affirming the desk's cautious optimism. We note that this optimism reflects a possible turning point for EM currencies, particularly as macroeconomic conditions begin to improve.
What the desk is arguing
The desk contends that emerging market economies are poised for recovery, as highlighted in the latest insights from Goldman Sachs Research. Per the full note, Daly points out early signs of stabilization in EM economies following the challenges faced last year, particularly around September to October 2022.
Supporting evidence includes a general rebound in economic activity, with Ankara experiencing a gradual recovery from recent turmoil. For example, Turkey's economic performance is expected to improve, albeit slowly, marking a shift from the worst periods of growth seen last year.
Where it sits in our coverage
As there is no internal coverage data available regarding specific currency pairs, this section has been omitted.
How other firms see it
Currently, there is no internal coverage data available that provides insights into firm views on related currency pairs, leaving this section empty.
What the calendar says
There are no upcoming high-impact events for emerging markets in the next 30 days that would influence this outlook.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Emerging markets show early stabilization signs amid economic recovery.
- 02Turkey's growth outlook is improving, despite a slow recovery process.
- 03The long-term growth outlook for CEEMEA remains favorable.
- 04Macroeconomic conditions are shifting positively, supporting EM currencies.
Market implications
Traders should watch for trends in EM currencies, particularly against developed currencies, as stabilization signals become clearer. Pay attention to any emerging data releases from Turkey, which may provide crucial insights into the recovery trajectory.
Risks to this view
The primary risk to this bullish outlook hinges on geopolitical instability or renewed economic turmoil within key EM countries like Turkey, which could stifle growth and negate current recovery signals.
Emerging market economies are showing early signs of stabilization, according to Kevin Daly of Goldman Sachs Research, and a number of the factors that contributed to the weakness of EM economies last year have now been reversed. "There has already been the beginnings of a recovery from the lows pasted in September-October last year," he says. Also in the episode, Daly discusses the outlook for his core focus area, CEEMEA – Central and Eastern Europe, Middle East and Africa – and explains the impact of Turkey's economic turmoil. "We expect the recovery in Turkey to be very slow…but nevertheless, we do seem to be past the worst point of Turkish growth" he says. He argues that the long-term growth outlook for the region is positive.
This podcast was recorded on March 6, 2019. All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced, in whole or in part.
The information contained in this podcast does not constitute research or a recommendation from any Goldman Sachs entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefor (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs, and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast.
In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity. Copyright 2019 Goldman Sachs & Co. LLC.
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