Emerging-market equities were supposed to be the dogs of 2016 because of dour global growth. But expectations are outpacing reality. Some bourses—including Brazil, South Africa, and Russia—have generated stunning double-digit returns. Why did so many experts get their strategic outlook so wrong? One angle is home-market bias among those investors actually based in emerging markets. Local equities have become a default choice amid a volatile global backdrop. Still another facet may be that political trends in the West have revved up inflation expectations, with some commodity-oriented nations likely to benefit from the changing cycle. Regardless of the root cause, many investors have found this year to be a joyride. We expect that the romp will continue, at least through the fourth quarter. Risk, after all, is relative. ■
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