Russ discusses the catalysts favoring emerging markets, beginning with the Federal Reserve.
Starting in late August, two things happened that had not occurred in several years: The Federal Reserve started expanding its balance sheet, and emerging markets began outperforming. The two are intimately related and are likely to continue.
Back in July, I highlighted the importance of monetary and broader financial conditions for emerging markets. While the price and availability of money matters for all risky assets, emerging markets are particularly sensitive, even more so since the financial crisis. The pivot by the world's central