Derailing this bull market will take more than a few rate hikes

The darling of 2016 has been Emerging Market (EM) equities, up around 15% in US dollar terms beating the world market by 10%. Low rates have kept the dollar weak, and driven flows into EM as the search for yield has resurfaced. The conference did little to push back on this with many agreeing rates will rise slowly to a level lower than prior peaks. Thus keeping the medium-term story for EM intact. US Fed Vice Chair, Fischer’s comments were a catalyst for profit taking in a sector that has been flooded with hot and fast money lately. This week’s US jobs data could be a pivot point for Fed debate, and EM in the short-term looks overbought against some of these near-term risks. Morphic’s view is it will take more than several hikes to derail this bull market and views dips as an opportunity to add exposure.