Risk assets such as emerging market equities have been thrown under the bus in the recent months on concerns about the Federal Reserve scaling back its monetary stimulus, but with investors coming to terms with tapering, are the worst days over for the battered asset class?
The MSCI emerging markets index has plunged 8.2 percent over the past three months, a stark contrast to the S&P 500 and FTSEurofirst 300 gains of 7.9 and 1.6 percent, respectively, over the same period. This is among the worst-ever periods of performance for emerging market equities relative to their developed market counterparts, according to Morgan Stanley.
(Read more: Why Bernanke's legacy relies on emerging markets)
But the storm has likely passed, says research firm Capital Economics, which argues that impact of tapering and worries over a growth slowdown in the developing economies, have now been factored into equity prices.
"A tapering of the Fed's asset purchases is surely now discounted. The central bank should continue to tread extremely carefully, with rates probably remaining near-zero until early 2015," Capital Economics, wrote in a new report.