Investors thinking about betting in emerging markets should look at Brazilian stocks, Mexican bonds and banks in the space, according to strategists and analysts.
Brazilian stocks are off to a high-flying start this year as investors bet newly minted President Jair Bolsonaro will push through key reforms. In Mexico, relatively high yields make their bonds attractive. Strategists are also betting that a dovish U.S. Federal Reserve, constructive outlooks for 2019 and a possible resolution to the U.S.-China trade war can bolster emerging-market banks.
Emerging markets have been one of the hottest trades of the year. The iShares MSCI Emerging Markets exchange-traded fund (EEM) is up 7.6 percent. EEM fell 17.1 percent last year and was in bear-market territory, trading 20 percent from its 52-week high.
"This is one of the best times to diversify into emerging markets," said Luca Paolini, chief strategist at Pictet Asset Management. "Everything is pointing to outperformance in emerging markets."