Pimco Adviser Dials Up Emerging-Market ‘Trade of Decade’ Bet

(Bloomberg) -- Emerging-market equities are flashing a buy sign amid their worst year since 2011, according to Research Affiliates, a sub-adviser to money managers including Pacific Investment Management Co.

Stocks in developing nations will return an average of 7 percent annually during the next decade, more than any other asset class, the Newport Beach, California-based firm said. That’s up from its January forecast of 6 percent.

Research Affiliates is dialing up a prediction it made back in February 2016, when the firm called emerging markets the “trade of a decade.” The advice proved prescient: Stocks surged 81 percent through their peak in January 2018.

This year has been less rosy as equities slumped into a bear market amid the threat of an all-out trade war, a strong dollar and rising U.S. interest rates. Still, investors and strategists from JPMorgan Chase & Co. to UBS Group AG and Morgan Stanley’s Lisa Shalett have also highlighted attractive valuations in the asset class.

Research Affiliates also said it expects emerging-market local bonds and an index of stocks from Europe, Australasia, Israel and Asia to outperform. The firm sub-advises about $200 billion for Invesco Ltd., Charles Schwab Corp. and other managers in addition to Pimco.

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