Banking giant JPMorgan (NYSE:JPM) forecasts that stocks in emerging markets will rise as much 20% in 2021 after being largely ignored by investors this year.
China, India and many other emerging markets have been shunned by investors in 2020 as they largely flocked toward safety during the global pandemic. But now, with a Covid-19 vaccine available, JPMorgan sees emerging markets making a comeback in the New Year.
In particular, the Wall Street firm sees opportunities for stocks in Brazil, Indonesia, South Korea as well as Thailand. In terms of industries, JPMorgan said the consumer discretionary sector as well as those related to entertainment and leisure have "room to catch up."
Specifically, JPMorgan sees stocks in the developing world posting "double-digit" gains of up to 20% in 2021. And that positive view also extends to bonds.
Historically, investors have had about 9% allocated overall to emerging market stocks, she explained. At present, that allocation is around 7%. JPMorgan forecasts that emerging market bonds will rally 5% to 6% higher next year.
In a bid to keep financial markets afloat, major central banks such as the U.S. Federal Reserve have slashed interest rates, lowering the cost of debt while also making bonds less attractive.
The yield on the benchmark 10-year Treasury note has sat below 1% for most of 2020. In comparison, the yield on the 10-year Chinese government bond was at 3.32% as of Friday morning.
