(Bloomberg) — Traders across the world may be coming around to the idea that the U.S. election isn’t going to be the tumultuous event it was once expected to be.

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But the real believers seem to be in emerging markets.

Optimism that the November election result will go uncontested and speculation a U.S. stimulus package will be agreed whatever the outcome are damping concern about fluctuations through year-end. Yet, while U.S. VIX futures declined last week as bets on likely price volatility eased, the drop was slower than for emerging markets.

“It does appear that emerging-market investors are slightly more sanguine about risks through the end of the year than what you’re seeing in developed markets,” said Nick Stadtmiller, a strategist at Medley Global Advisors in New York. “As long as global liquidity remains ample, and as long as global markets at least hold their ground, I would expect emerging-market assets to perform well. Yields on many emerging-market assets are high, especially relative to rock-bottom yields on developed market assets.”



chart: EM volatility index trades at a discount to the VIX gauge for U.S. stocks


© Bloomberg
EM volatility index trades at a discount to the VIX gauge for U.S. stocks

Falling volatility may give investors more confidence to put cash into an asset class enjoying one of its best phases since the virus-induced global sell-off in March. Citigroup Inc. said last week the worst is over for developing-nation assets and Morgan Stanley is betting volatility will continue to ease as the outcome of the November vote becomes clearer.

Emerging-market equities and currencies climbed to an eight-month high on Friday, while local-currency bonds had their best week since May on the prospect of U.S. fiscal stimulus. One-month implied volatility on the Brazilian real, South African rand and Russian ruble fell by the most among peers last week, signaling improved appetite for risk assets.

(Bloomberg) — Traders across the world may be coming around to the idea that the U.S. election isn’t going to be the tumultuous event it was once expected to be.

Loading...

Load Error

But the real believers seem to be in emerging markets.

Optimism that the November election result will go uncontested and speculation that a U.S. stimulus package will have to be agreed whatever the outcome are damping concern about fluctuations through year-end. Yet, while U.S. VIX futures declined last week as bets on likely price volatility eased, the drop was slower than for emerging markets.

“It does appear that emerging-market investors are slightly more sanguine about risks through the end of the year than what you’re seeing in developed markets,” said Nick Stadtmiller, a New York-based strategist at Medley Global Advisors. “As long as global liquidity remains ample, and as long as global markets at least hold their ground, I would expect emerging-market assets to perform well. Yields on many emerging-market assets are high, especially relative to rock-bottom yields on developed market assets.”

Falling volatility may give investors more confidence to put cash into an asset class enjoying one of its best phases since the virus-induced global sell-off in March. Citigroup Inc. said last week the worst is over for developing-nation assets and Morgan Stanley is betting volatility will continue to ease as the outcome of the November vote becomes clearer.



chart: EM volatility index trades at a discount to the VIX gauge for U.S. stocks


© Bloomberg
EM volatility index trades at a discount to the VIX gauge for U.S. stocks

Emerging-market equities and currencies climbed to an eight-month high on Friday, while local-currency debt had its best week since May on the prospect of U.S. fiscal stimulus. One-month implied volatility on the Brazilian real, South African rand and Russian ruble fell by the most among peers last week, signaling improved appetite for