NEW YORK ( TheStreet) -- After a decade of outperformance. emerging markets stocks and bonds are headed for choppy seas, according to Goldman Sachs economists.
Forecasters at the investment bank argue emerging markets assets "are unlikely to deliver anything close to the kind of risk-reward that investors had become used to" in the last decade, and they add that "absolute returns are likely to be much lower."
Five trends have contributed to the emerging market outperformance, Goldman's economists write. These include massive Chinese growth, rising commodity prices , sovereign deleveraging, tame inflation and falling interest rates in the U.S. All of these trends are now either reversing or flattening out, according to the report.
On the plus side, Goldman's economists write that emerging markets are on sounder financial footing than they were in the past, and they have lower debt-to-GDP ratios than many developed world countries.Emerging markets stocks have certainly taken it on the chin of late. Vanguard MSCI Emerging Markets ETF (VWO), for example, is down more than 15% since May 8 vs. a 1.21% drop for the S&P 500. -- Written by Dan Freed in New York. Follow @dan_freed
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV