The current volatility in markets is not surprising when you consider that we’ve just had the first Fed rate rise in nearly a decade and there are strong concerns about global growth. We anticipate that the volatility will come down again if global growth holds up, which we believe it will. China is a particular focus for concern for many people, but we think this is overdone.
China is transitioning from a manufacturing-led to a service-led economy, which will require some adjustment. But there is plenty of evidence that China’s service economy is doing very well, which is encouraging.
Emerging markets more broadly have slowed a lot, but it is not a homogenous asset class and there are places that are doing well, for example India, the Philippines and Indonesia.
Another cause of recent instability—the low oil price—is likely to persist for a while, with $25-$30 per barrel being the long-term bottom price.
This environment is actually a very good investment opportunity for active investors to buy good companies that have been sold by ETFs and are available at attractive valuations. Quality companies come through downturns stronger than before, and that will happen this time too.
February 10, 2016
Christopher Alderson, Head of International Equity, Director of T. Rowe Price International Ltd.