Global Wave should start to buoy Emerging Markets

The Global Quant Strategy team's macro indicator, the Global Wave, has inflected and is now rising. This positive signal follows the longest downturn on record (25 months). And while US markets have been rallying for over a year, US outperformance during Global Wave downturns is typical. History shows that in the year after previous Wave troughs, global equities rallied and emerging markets modestly outperformed the US. Consistent with this improvement in riskier regions, cyclicals also tend to outperform defensives in the year after the trough. Nigel does note there are 3 risks to the upturn, (1) if inflation is sticky and monetary policy remains tighter, (2) if China's recovery is delayed or muted, this could lead to a drag on the global economy and (3) if we see an earnings downturn, perhaps because of higher rates.

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