Financial markets have been on an impressive run since Donald Trump was elected in November. The S&P 500 is up 10.7%, the Dow is up 13.1% and the MSCI World (which is a proxy for developed markets) is up 9.9%. Trump's promises in terms of tax cuts, infrastructure spending, protectionism for US industries, repeal of environmental legislation and deals – among many others – have helped boost investor sentiment, especially in the US. Coupled with positive economic data for growth and employment, the mix played very well for those holding long positions in equities.
But with Trump also came a stronger dollar and interest rate hikes which dented optimism in emerging markets, at first at least. A strong dollar and higher interest rates could quickly derail their finances, as these countries are often leveraged through dollar-denominated debt. A higher dollar and higher US rates would mean tougher credit conditions for them. But things have changed quite a bit since the beginning of the year and the good vibrations shared by US investors have become entrenched pretty much everywhere, with emerging markets being no exception.
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