NEW YORK (The Street) --- U.S. markets will ultimately benefit from the emerging markets rout that underpinned global equity losses for a third day on Monday, fund managers say.
Emerging market stocks are suffering their worst start to a year since 2009 amid a sell-off in the currencies of Turkey, South Africa and Brazil as indebted developing nations struggle with a softer global growth outlook. Making matters worse, access to 'easy money' from stimulus programs is being wound back, exposing countries already running current account deficits.
With emerging market economies on their heels, commodity prices have been dropping, a potential boon to U.S. companies and equities. Meanwhile, the selling in developed market stocks by global investors seeking to cover their losses in emerging markets is a temporary phenomenon, said Wells Fargo Funds Management chief portfolio strategist Brian Jacobsen.
"Longer term we'll see continued declines in commodity prices which will feed through to input costs for businesses - a positive for profit growth for US companies and our markets," Wisconsin-based Jacobsen said in a phone interview. Wells Fargo oversees around $238 billion in funds under management.
Jacobsen expects a reversal bounce if the Federal Reserve decides not to continue cutting its massive bond-buying program on Wednesday.
He said fears of another emerging markets debt-crisis were probably overblown, citing factors such as better debt-to-GDP ratios, more debt held in local currency bonds which provided easier financing and greater flexibility with exchange rates.
Raymond James chief investment strategist Jeff Saut predicts a fall of between 5-7% or 10-15% for US markets, depending on the extent of losses in emerging markets. He said there was a real possibility of another debt crisis in emerging markets, which would drag on US stocks.