Emerging Markets still attractive after Brexit

Emerging market stocks are still an attractive investment after the United Kingdom vote to leave the European Union, dubbed "Brexit," according to a prominent asset manager at BlackRock.

While global growth forecasts have been adjusted down after the historic Brexit vote, the direct impact in emerging markets and developed Asia will be minimal.

According to BlackRock's global chief investment strategist Richard Turnhill, "We expect lower rates ahead, with the Bank of England set to cut interest rates soon, U.S. rates on hold and potential for further quantitative easing in the UK, eurozone and Japan. We believe there’s limited scope for monetary policy to reflate the global economy, however, and much-needed fiscal stimulus and structural reform progress looks unlikely over the coming months.

In response, we have downgraded European stocks to underweight, with a negative view of the eurozone banking sector. We have a preference for income, and have upgraded U.S. credit and emerging market debt to overweight. We like U.S. investment-grade credit, hard-currency emerging market debt, stocks in selected emerging marketss and global quality and dividend-growth stocks. Overall, in today’s uncertain, low-growth environment, we prefer credit to equity and believe exposure to gold and alternatives as diversifiers makes sense.”

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