Divergent emerging market outcomes in an uneven recovery
Portfolio managers and emerging market debt specialists Jennifer James and Ales Koutny analyse emerging market (EM) country fundamentals and consider how they influence opportunities for investors.
- EMs are ahead in their tightening cycles relative to developed markets (DMs), but further divergence between countries will emerge in their differing paths to normalisation.
- Assessing economic fundamentals can indicate how the inflation and growth outlook could look for EM countries this year and their resilience against volatility from a rising rate environment.
- As inflation wanes during the second half of 2022, we believe real rates could turn more positive in some EMs while lessons learnt from how EM asset classes perform during a rate hiking cycle could be instructive for investors and asset allocation decisions.