The Federal Reserve’s long-awaited shift to rate cuts this week is likely to boost emerging market assets in Asia, extending their recent lead over global darlings like Japan and chip stocks.
Smaller markets in Southeast Asia could continue to outperform larger markets, while a significant rise in the yen could cause volatility in the Japanese market and in outperforming chip stocks. Fears of a yen carry trade unwind could hurt markets globally.
Investors are divided over whether the Fed will begin its easing campaign with a standard 25 basis point cut or a larger one. A half-point cut could raise doubts about the health of the U.S. economy, outweighing any enthusiasm about the cut’s stimulus effect.
