The Fed has certainly sent a positive signal with its significant reduction of interest rates. This improves the outlook for emerging market currencies, and also offers central banks from emerging markets the opportunity to ease monetary conditions. This is likely to stabilise the economy and boost consumer and corporate sentiment.

Obviously, some investors remain sceptical about the political pivot. This is perhaps not surprising when you consider how much the Chinese market has fallen over the past three years. Moreover, the political response comes at an unusual time. Last year, many expected the Chinese government to take action, but that didn't happen. Nevertheless, it is now a clear signal that the Chinese government has staked its reputation on this stimulus. There was a meeting of the Politburo, which President Xi himself attended, and a meeting of the Ministry of Finance. Xi himself has set the goal of stopping this decline.

Our impression is that the Chinese government has recognised the extent of the economic downturn and the underlying causes – the property market, municipal debt, low consumer confidence and weak confidence in the private corporate sector. We are confident that this will have a positive impact on stabilising the economy, and ensuring that China achieves its 5% growth target this year.

China has certainly grown faster in the past. In the early 2000s, we got used to China growing by more than 10% for many years. This was fuelled by capital investment in infrastructure, and to some extent also by more speculative investment in the property sector. In recent years, however, the Chinese economy has moved away from this growth model in favour of a model that focuses on high-quality manufacturing, consumption and services. There is no doubt that consumption has suffered from the property correction. However, this shift was politically motivated and not caused by market developments, interest rates or financial turmoil. The economic changes had a major impact on regulation. And the crisis of recent years has also had a major impact on the mood of Chinese consumers and companies.

China's transition and its development, which is very much driven by politics and not by other market forces, can already be felt this year. The contribution of property investment to GDP, which was at a historically high 15% from 2014 to 2020, has fallen to below 10% of GDP and now stands at around 9%. One aim of the policy is to restore confidence among Chinese consumers and companies and stabilise the property sector. Recently, it has been very easy for investors to be short in China, especially compared to more resilient markets such as Taiwan and India. The Chinese government is now trying to stop this, even though we only know a few details about the fiscal stimulus or the support for the property sector so far. The economic stimulus package has the potential to address the ongoing challenges in the property market and restore consumer confidence.

The development of the Indian market is particularly supported by the comprehensive reform programme under Prime Minister Modi and his BJP party. There have been real structural changes that have fuelled the rise in GDP growth and the performance of the stock market. These include electrification, a nationwide goods and services tax to create a single domestic market, reduction in corporate tax, real estate regulation, digital reforms and privatisation. The political focus has now shifted somewhat towards more redistribution to promote investment and job creation. However, the market remains strong.

We have underweighted India in our portfolio. We like the country's long-term prospects, but the MSCI India index is trading at 27 times earnings, making it the most expensive of the world's major markets. The S&P 500 trades at 24 times, Taiwan at 20 times and China at only 11 times. The high valuation of the Indian market is driven by strong domestic participation in the capital markets, whereas foreign investors have withdrawn their money in view of the strong market returns in recent years and the current high valuations.

Wealth in India has continued to grow and Indians have shifted from additional savings and investments in gold to investments in the equity market. This continued inflow has given the stock market such a high value. In our view, there are some very good companies there, but we believe that valuations are stretched in some areas, hence the underweight position.

That is the big question. So far, the market there has proved to be very resilient, as has Taiwan, which has performed almost in line with the S&P 500 over the last ten years. But we saw a flash crash in India at the beginning of August, triggered by economic concerns in the US and worries about earnings momentum in the technology sector. The Japanese central bank's interest rate hike, which led to a partial slowdown in the yen carry trade, also led to shifts in Japan and India, with money being taken off the table. Foreign investors have withdrawn money from India in recent months. China is still underweighted in many funds. Investors could consider a reallocation.

We have a really interesting situation this year. In addition to India and Taiwan, there were also elections in Turkey and South Africa. These are two markets that we have avoided in the past because they delivered very lacklustre results, and the economic policies were really frustrating. Now both governments have come under scrutiny from the electorate. The ANC in South Africa had to form a coalition government, the Government of National Unity. With better governance, South Africa could once again become an attractive destination for long-term investment. Similarly in Turkey, where the central bank is to become independent in order to pursue a more orthodox monetary policy to combat runaway inflation.

There is of course the technology sector and the Magnificent Seven. A sector that has already made very strong gains. In the emerging markets, Korea and Taiwan are home to technology powerhouses that are benefiting from this. This is therefore an area that we continue to cultivate and overweight. Then there is the industrial sector. Sectors such as batteries, robotics, solar and manufacturing equipment have gone through a really tough down cycle and look like they are on the verge of bottoming out. The third area where we see some opportunities is in the commodities sector. If you look at the overall picture over the last hundred years, we are about 14 years away from the last peak.

I'm not predicting an upward cycle now, but there are commodities that we believe are in a structural supply deficit and are therefore very interesting from a long-term investor's perspective. Copper is important for the energy transition and digitalisation. Aluminium too. Emerging countries that export commodities, from Indonesia to Brazil, Peru, Chile and South Africa, can also benefit from this. An upturn in China could also give these commodity export markets a new tailwind.

About the person: James Cook has been Head of Investment Specialists at Federated Hermes Limited since November 2011, and is also Investment Director for Emerging Markets. In this role, he leads a team of investment specialists who manage all equity, fixed income and multi-asset products.