My Q3 2019 Market Outlook looked the emerging world, where earnings and valuations are yielding mixed messages (see CHART 6 and CHART 7).

Korea’s forward earnings outlook appears dismal and insufficiently punished by the market, despite underperforming the rest of EM by -10% in the past twelve months. Yet in June, Korea was among the best performing markets worldwide gaining 8.8% vs 6.5% for the rest of the world). Meanwhile, China’s -8% underperformance vs EM over the past year has coincided with a modest multiple contraction amid an earnings outlook that was not nearly as bearish as Korea’s. Latin America’s recent performance appears broadly in line with earnings expectations, thus showing signs of recent market efficiency. India shines as a lone bright spot among the major emerging markets where forward expectations are ahead of trailing performance, yet Indian equities have nonetheless lagged EM and the rest of the world YTD.

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