Red Wave washes over Emerging Markets

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Image by DALL.E I didn’t intend to write a note until the end of the year, but clearly, recent events are overwhelmingly significant for EMFX. This will be a brief update on my initial thoughts on the consequences of the Red Wave and the return of the now all-powerful Don.My last note struck an optimistic tone. We had a compelling combination of macro dynamics with the potential to deliver positive tailwinds to some heavily beaten-up EM assets. This hasn’t been entirely washed away by the Red Wave, but much of it has been, at least in the short term.In this note, I discuss the following:Philosophical take on the result (feel free to skip this personal indulgence).Summary of macro-economic hot takes.EMFX performance reviewImplications for EMFX and the framework.The USD.Subscribe nowPhilosophical Take on the ResultThe election result has been distressing to many, though not surprising. To my mind, it’s further evidence of the chaotic times we’re living through. Centrist liberal politics has struggled to deliver results in the face of multiple headwinds. Demographic challenges, technological progress and pandemic spending have strained government budgets and increased inequality. The return of inflation to developed economies has affected cost-of-living pressures that squeeze the lower end of the income distribution. The internet and social media provide unprecedented transparency into the wealth and lifestyle gap, fueling envy. Incumbent parties have paid the price in elections across the globe, as voters crave change and protest the outcomes their leaders have delivered for …