“It’s the economy, stupid” was a message posted onto the wall of a US presidential candidate’s war room in the early 1990s. The intention was to remind campaigners that the key message and battleground was economic wellbeing of the electorate.
For some professional investors looking at emerging market (EM) exposure, the same message—without the insulting last word—holds true: they gauge their exposure on a variety of measures pertaining to the current, and likely future performance of EM as a sector, or of countries within it. But for index providers and many other market participants, assessing whether a country is developed, emerging, or frontier, based on these pure economic measures is not the sole, or even main, consideration.
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