EM assets during easing cycles
Ashmore’s latest Market Commentary examines how EM debt and equities have behaved during past US easing cycles, and what the recent 25bps Fed cut could mean for investors.
After nine months of unchanged policy rates, the US Federal Reserve (Fed) cut by 25bps this September. Most market participants expect multiple rate reductions over the coming months. To put the Fed’s decision into context, Ashmore examined the impact of easing cycles on the Treasury yield curve, the S&P 500, and emerging market assets since 1980.
In Ashmore’s view, the observed patterns offer useful guidance on what to expect from here. For investors, the crucial question is whether this cut is the first of a recessionary easing cycle, or one of (potentially) multiple ‘insurance’ cuts. This distinction has historically characterised the relative performance of equities, credit, and emerging market (EM) assets, as well as the dynamics of the US yield curve.