The equity markets of mature economies will outperform those of emerging markets this year, said Marc Faber, publisher of the Gloom, Boom, and Doom report, on CNBC.
Over the last 18 months, emerging market equities have performed tremendously. The stock markets of some of these countries, in fact, have handily exceeded their pre-crisis highs. It's also the first time that emerging markets have traded at a premium to developed markets.
While this past outperformance doesn’t automatically make emerging market equities expensive, many of them are not bargains anymore, said Faber.
Moreover, the flood of global liquidity – spearheaded by the Federal Reserve’s $600-billion quantitative easing program – will drive food and energy prices higher. This inflation will impact lower income countries more than developed countries because food accounts for a larger portion of consumer spending.
Policymakers in these developing countries have two choices: let inflation accelerate or tighten monetary policy. Faber said both choices will be negative for equities.
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