Emerging markets have had different approaches to coping with COVID-19 and are at different stages of recovery. Our emerging markets equity team examines trends, news and data shaping emerging markets in the third quarter, and shares its latest outlook.

Three Things We’re Thinking About Today

  1. Brazil has been among the hardest hit by the COVID-19 pandemic, just behind the United States and India in the number of reported cases. However, we have started to see the number of new cases in Brazil start to decline. Ironically, we believe that the government’s decision against implementing a country-wide lockdown at the onset of the pandemic has reduced the likelihood of a second wave. Heavy government spending and monetary policy easing have helped bring some stability to the economy. Moreover, Brazil has continued to implement key reforms despite political noise. In terms of investment opportunities, we continue to favor the financials sector, especially companies with strong capital market exposure. Interestingly, Brazil’s stock exchange itself has a strong sustainability agenda, while environmental, social and governance (ESG) principles are not only implemented within the exchange itself, but also promoted in the Brazilian stock market broadly. E-commerce is another exciting investment theme, with several large players competing in the online space. As in other countries, the COVID-19 crisis has accelerated the adoption of internet-based retailing in Brazil. Despite continued uncertainties, our view on Brazilian equities is generally positive.

  2. The COVID-19 pandemic has underscored the importance of health care in China, reinforcing existing structural trends that could drive a new wave of innovation in the country. Multiple factors are propelling domestic drug and medical device development including rising health care demand, an aging population, growing lifestyle diseases and rising income, coupled with government efforts to strengthen the health care system. In addition, the growing numbers of overseas-educated

Key Takeaways:

  • Flat market early after Monday’s rally as caution shows up ahead of tonight’s debate
  • Fed speakers in focus as five prepare to deliver remarks today
  • Micron earnings after close could put focus on semiconductor industry

After the week started with a bang, what kind of follow-up might be in store? Maybe one where the market just drifts around looking for direction, in part because of trepidation ahead of tonight’s presidential debate.

The cautious mood seems to be reflected in pre-market trading, where major indices were barely changed ahead of the open. Besides the debate, focus could turn toward Fed policy, with no fewer than five Fed officials scheduled to deliver remarks spread out across the day. Investors also await any stimulus-related developments in Washington, D.C.

Another thing awaited is a look into the semiconductor industry, with Micron (MU) expected to report after the close. Memory chip prices are likely to be under scrutiny when the company unveils results, according to MarketWatch. Prices for those have been under pressure lately following a rush to buy chips by Chinese telecommunications-equipment company Huawei earlier this year.

Technical factors could also come into play today, as the S&P 500 Index (SPX) starts Tuesday just below its 50-day moving average (near 3350) after bouncing off its 100-day moving average late last week down near 3210. A close above the 50-day average, if it happens, could potentially provide more upward traction (see chart below). The 50-day had been holding as key long-term support before it got breached recently, so bullish investors would probably like to see it back above that level as a sign of possible strength.

About tonight’s debate: It would probably take a major “win” or “loss” by one or the other candidate to really steer the market