Emerging markets: the bottom line - BBH

Analysts at Brown Brothers Harriman explained that after the surprise US election outcome, EM has sold off sharply.  

Key Quotes:

Given the expected fiscal stimulus from the next administration, the odds of the Fed hiking next month have risen to near certainty.  Furthermore, the outlook for 2017 has tilted more hawkish as well, with two more hikes now close to consensus.  

Bottom line:  A more hawkish Fed outlook should keep this EM sell off going for now, with turbulence likely to persist near-term.  This is especially true if the long end of the US continue to underperform.  So far, this current edition of the Taper Tanturm is taking a toll on EM.  Below, we identify retracement targets of the EM FX rally from the June post-Brexit lows to this month’s highs.