(Bloomberg) -- Emerging-markets stocks are on the cusp of a major selloff as US economic weakness is set to persist, according to a strategist who correctly predicted a decade of underperformance for the asset class in the wake of the financial crisis.
“It’s a bear market, it is not just a correction, so it’s going to be more than 20%,” said Arthur Budaghyan, chief emerging markets and China strategist at BCA Research. “I don’t think there’s any market including India that will go up or be flat. I think everything will go down.”
More than $900 billion of value was wiped from emerging-market stocks amid the global rout on Monday, leaving valuations for the main EM benchmark at the lowest since November.
Budaghyan is a long-time emerging markets equity bear, having downgraded stocks in the region to underweight in April 2010 and holding this view for a decade. Developed markets equities jumped almost ten times during that period, while the emerging markets index only rose by 6%.
He is an outlier in the market, with senior investors at HSBC Asset Management and UBS Wealth Management predicting earlier this year that the valuation discounts could help emerging markets outperform their developed market peers going forward. Budaghyan, however, notes that earnings per share for emerging-market companies has been stagnant for 13 years.
US economic growth is likely to flatline at the start of 2025, the strategist said, adding that weak growth and slowing revenues are among the main reasons for future declines in profits of US companies.
“It’s not only limited to emerging markets. I think developed markets are very vulnerable and will go down,” Budaghyan said.
Elsewhere, he suggested buying government bonds of major economies as yields drop, with central banks set to cut rates as the threat of recession looms.
“Investors should be long bonds, US dollar cash and gold,” the strategist said.
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