After all, only if justification for the market recovery can be found in better fundamentals can the recovery continue. One of the reasons for the emerging markets lagging behind between 2010 and 2013 was the deterioration of economic policy and the lack of reforms. The strong performance of the risk markets with upcoming elections – Indonesia, India and Brazil – indicates that there is suddenly hope of change. The prospect of reforms has been a powerful theme in recent weeks, particularly in Brazil. President Dilma is losing popularity in the polls and the Brazilian market is soaring, gaining 15% in the space of two weeks.

Real reforms and less government intervention in the economy would, indeed, be the changes that could herald a new, positive trend for the emerging markets. For countries such as Brazil and India, it is clear that policy errors have thrown the economy back in recent years. A better chance of change therefore justifies an improving market. It is therefore understandable that investors are keeping a close eye on elections, electoral programmes and polls. 

But is growing hope of better policy and reforms a fundamental confirmation of the strength of the emerging markets in recent weeks? Not really. It is anticipation of something that might possibly become the fundamental justification for strong markets. The pro-reform candidates first have to actually win the elections, then they have to be capable of forming a stable government, after which it remains to be seen whether they are actually as pro-reform as they appear. It might seem a little unsporting to put so much stress on the uncertainties, but there has been so little reform over the past ten years that expectations can easily become exaggerated.

It is too early to talk of a new positive trend for the emerging markets. Caution is urged for the time being. There is a chance of positive policy changes. But it would be wise to wait until the first major elections have been held. The negative growth momentum in the emerging world has to turn, too. And, most importantly, good arguments have to be found to prove that China is able to avert a credit crisis.