In Q2 across equities, bonds and FX emerging market countries outperformed all other countries. In equities Argentina’s stock index posted 46% returns, Angola led the way in fixed income with a 117% bond return and in FX the Taiwanese Baht rallied 4.5%. You are probably thinking up a strategy to invest in these countries as you’re reading this but, first we should explain the cause of these striking returns. What has actually happened here is called a market recovery. Assets have effectively ‘recovered’ back to a level similar to their pre Covid-19 sell-off and are now more a reflection of their fundamentals instead of the flight to quality sell-off which was more a representation of investor fear and confusion.

Reuters Graphic

Recoveries are important economic events because after stocks and bonds hit rock bottom, companies which can’t keep up with the pace at which the world is growing in effect fall out of the global economy and any proprietary technology or patents they owned is bought out by larger companies. There are several reasons for companies defaulting and going bankrupt such as out-dated business models, old technologies or cash-flow problems. When this ‘dead-weight’ is cleared confidence is re-injected into the economy and appetite for investment will begin to stabilize in the form of a bull market as seen after all economic crashes.


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