Equity Strategy: Further EM Underperformance Likely in The Short Term

• Fitch Solutions maintains a positive outlook over the medium term for global equities, but expects developed market (DM) equities to continue outperforming emerging market (EM) equities. This outlook is underpinned by the strong global economic recovery and still accommodative fiscal and monetary policy. 
• In the US in particular, Fitch expects that equity markets will be supported by strong economic and earnings data as well as the improving attractiveness of equities relative to bonds. However, the divergence in performance between most DM equities and most EM equities is likely to continue on the back of the two-speed economic recovery caused by uneven vaccination progress across the globe. 
• From a regional perspective, Asian equities look set to remain under pressure in the short term due to the continued spread of Covid-19 and slow vaccine rollouts.  Chinese equities will also continue to underperform in the short term due to Beijing’s crackdown on several sectors and downside risks to growth.

(Source: Fitch Solutions)