Which emerging markets should you be considering now?

Kletz noted that, although emerging markets tend to be a high beta type of asset class, their decline is in tune with the broad global equity indices, which are also down about the same amount. He reminded advisors, though, that this is not a homogeneous asset class.

“You have countries with all different types of political and economic profiles,” he said. “They get lumped together by some common denominators among them, like the level of development, GDP per capital, and the strength of their financial market institutions, but there are many, many differences,” he said. “The divergence in performance, this year, among EM nations has been quite substantial, even by recent-year standards.”

Kletz said investors can’t trade Russian assets anymore because they’re no longer investable. In Asia, Indonesia did well, but China has had a sharp correction and been down about 20%, and it was “one of the few markets that actually had policy support”.

“The Chinese policymakers, both on the monetary and fiscal side, were biased toward stimulating the economy, whereas just about everyone else was going in the opposite direction,” he said. “The lockdowns that China experienced recently, in response to COVID outbreaks, have really put a dampener on that economic momentum and investors’ risk appetite or enthusiasm toward Chinese assets.”

Asia has the biggest index allocation – with China having the greatest impact. But, the region is a commodity importer and Kletz said investor sentiment toward Chinese assets seem to be at all-time lows. Its inflation has remained relatively benign, even though a number of the area’s central banks haven’t been proactive in getting out in front of inflationary pressure, which Forstrong believes may be a disadvantage going forward. Still, he noted that the lockdowns will eventually end, and China will stimulate the monetary and fiscal side, which is critical, given it’s a “key cog” in global growth.