EET

We provide a check in our 10 charts to watch in 2020: both keeping score and addressing the "Where to next?" question.Among the key takeaways, we see global growth rebounding into 2021, with emerging markets set to surprise.We see underappreciated and underpriced upside inflation risks (especially given our bullish base case for commodities).Constructive on global equities, but more so ex-US (also bearish US dollar), and more so in value versus growth.Chinese equities could end up an underdog outperformer.

Despite a growing economic and technological decoupling between China and the West, the financial divide is actually shrinking.China's bond market - now the second largest in the world - has seen increased foreign participation, especially in its government bond market, where foreign ownership now exceeds 9%, up from a negligible level just a few years ago.The unknowns of the post-COVID-19 landscape demand greater attention to portfolio construction, and investors may wish to consider alternative paths to a more efficient portfolio and a diversified stream of returns.

In this article I will walk you through the commonly used but wrong way to think about volatility decay.We'll then walk through an example of volatility decay with realistic numbers.Afterwards, we'll build a simple mathematical model to calculate volatility decay from first principles.We'll compare the model with back-test simulations done on portfoliovisualizer.com.

Allocating to smaller companies can help broaden an EM allocation by providing a different mix of exposures to opportunities across countries and sectors.On a 20-year timescale, EM small- and large-caps have both outperformed large-cap developed markets by a wide margin.When searching for smaller EM companies with big potential, we believe investors should look for companies that are at the crossroads of positive change.