In the May 2021 edition of Numera’s Global Macro Monitor, we investigate the EM equity implications of vaccine inequality. Although global ‘reflation’ benefits EM assets, stark differences in public health risks versus DMs weakens the relative appeal of EM stocks versus past reflationary episodes.

EM stocks are extremely sensitive to global macroeconomic cycles. Typically, the combination of strong growth, rising commodity inflation and a weakening US dollar results in outsized EM equity gains. Yet despite a favourable global macro environment, EM equities have underperformed DM stocks by about 7.5% so far this year.

In this month’s report, we explore the factors behind this underwhelming performance, and the likelihood that EM stocks will reverse the current trend. We find EM equities are currently weighed down by vaccine inequality, since much higher EM public health risks exposes risky assets to deeper potential losses.

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