In a previous post, I explained that our macro scorecard points to idiosyncratic expansion in emerging markets. Many, however, are well positioned to participate in the current global economic expansion, in part due to external balances and exchange rates.

As the chart below illustrates, external imbalances, which are the amount of surpluses or deficits in a country’s current account, are not problematic for most large emerging economies.

They tend to have prudent macroeconomic policies, and current-account deficits are generally modest to the extent that they exist. Even where current-account deficits are significant, trade balances, which precede current-account balances, are moving in the right direction.

Emerging market exchange rates against the U.S. dollar also bode well for emerging economies. To illustrate, we separate emerging markets into two broad baskets—those that are manufacturers (where manufactured goods account for more than half of total exports) and those that are commodity producers (where commodities account for more than half of the total exports).

As the chart below shows, commodity producers have devalued significantly more than manufacturers, but since 2016, both groups’ exchange rates have largely stabilized. More recently, manufacturers have begun to see their exchange rates appreciate mildly relative to the U.S. dollar.

Those are just two reasons more of the major emerging markets are in a position to influence their own economic destinies than ever before. That makes emerging markets an interesting investment opportunity.

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Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
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