Mike Washington interviews Stratford Dennis, head of emerging market equities at Goldman Sachs, about the recent rally in emerging market equities. Dennis attributes the rally to positive growth differentials, a weaker dollar, and a stable S&P 500. He predicts a 10% upside rally in the MSCI EM index by year-end, citing attractive valuations, favorable financial conditions, and underweight institutional positioning as supporting factors. While acknowledging the cooling-off of Chinese equities, Dennis expresses more confidence in EM excluding China, particularly highlighting Brazil as a potentially high-growth area due to an anticipated end to the hiking cycle, attractive valuations, and the possibility of a market-friendly candidate in the upcoming election. He suggests that emerging markets are well-positioned to outperform the US in the coming years due to growth and earnings differentials and underinvestment in the market. Finally, Dennis emphasizes the importance of monitoring the US bond market as a key indicator for future equity performance.
