Does monetary easing in developed economies trigger outperformance in emerging markets?

Chart of the week

Global equity markets welcomed the dovish statements delivered by the Fed and the ECB in June, which were taken by investors to indicate that central bank support is set to continue. Although emerging market equities followed suit, they failed to outpace the US market between May 31st and June 20th.

So, would a rate cut by the Fed trigger an outperformance in emerging stock markets over the next six months? Such a scenario is far from certain if we analyse the last five monetary policy easing cycles. Six months after the first cut, the MSCI Emerging Markets Index slightly betters the S&P 500 on average. But a closer look reveals that it actually underperforms three times and outperforms twice.

Furthermore, on average, most of the outperformance occurs in the first two months.


In the past, monetary policy easing in developed countries has indeed been known to trigger short-term outperformance in emerging markets. But not always. We might add that emerging market growth has slowed sharply in recent months, which is not the case in the US. Over the long term, emerging market performance is driven more by the gap between developed and emerging economic growth than by US monetary policy cycles.


The opinion expressed above is dated June 20th, 2019, and liable to change.

This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS.


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Julien-Pierre Nouen

Directeur des études économiques et de la gestion diversifiée