At the start of the last decade everyone was bullish on emerging market equities. It is hard to recall now, but it was the consensus trade. You couldn’t attend a meeting or conference without being told how many people there were in China or how underwhelming the growth prospects were for developed economies compared to their emerging counterparts. The irresistible optimism was to prove unfounded as the asset class delivered a prolonged spell of underwhelming performance. This disappointment is merely one prominent example of perhaps the most common (and often damaging) investor behaviour; we take past performance, combine it with a persuasive story and extrapolate into the future.
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