Emerging Markets Problem: High Currenct Account Deficits, Weak Currencies and Dependence on Commodities

Higher trade war tensions between US and China is taking attention to the economy, Emerging markets are heavily dependant on cheap capital from the Fed and are very sensitive to a change in the course of monetary policy in the U.S. Especially the trade war favour

Rising trade tensions has kept stocks across the globe on edge with investors seeing big moves in indexes. Most of the investors are enter into the risk-on mode. The major stock indexes stateside are all down more than 3% this month.

Meanwhile, The investment management arm of Goldman Sachs scaled back its "overweight" exposure to emerging market assets Thursday, amid rising trade tensions between the U.S. and China. Beware guys 

"We have scaled back overweight exposure to EM (emerging market) currencies and EM debt until we gain clarity on the direction of travel for both U.S.-China trade relations and global growth, with the two being interconnected," Goldman Sachs Asset Management (GSAM) said in a note published Thursday. As reported from CNBC 

Emerging markets are very sensitive to the market condition, Flows into emerging markets can be dependent on cheap capital from the Federal Reserve and are very sensitive to a change in monetary policy in the U.S. Add to that domestic factors such as high current account deficits, weak currencies and a dependence on commodities, these markets can make for a risky investment.

High risk may lead to higher returns, but for now the MSCI emerging markets index has fallen more than 11% over a 12-month period. Meanwhile, the major stock indexes stateside are all down more than 3% this month. Maybe the risk-on mode will be the main topics for all investors in this world