Summary
The global macroeconomic outlook is favourable for Emerging Markets (EM) assets, as global growth remains resilient and inflation is generally very close to or within target ranges.
Key points
- Supportive macro backdrop
The Global macroeconomic outlook is supportive for EM prospects, with global growth remaining resilient and inflation generally on a declining trend. EM appear more resilient.
Although the EM growth premium is peaking and moving closer to the historical average, it still favours EM, albeit with increasing fragmentation and divergence among countries.
- Easier Monetary Policy
EM Central Banks adopted a more orthodox and agile approach in 2022 by raising interest rates and curbing inflation, positioning themselves favourably for the current easing cycle. The Fed's ongoing easing cycle creates a favourable environment for balancing growth support with vigilance against inflationary risks for more autonomous EM countries.
- Winners & losers: Asia in Focus
Asia plays a crucial role in shaping the future of the global economy, thanks to its rapid economic growth and leadership in technology and innovation. India’s economic outlook remains solid and promising. Meanwhile, in China, new stimulus measures aim to reverse the structural economic slowdown. While Southeast Asian countries have strengthened their trade positions.
- Risks to watch: US elections
The key risks to watch are geopolitics and the US election. A possible Trump 2.0 is a significant factor influencing the outlook for EM. Idiosyncratic stories and internal vulnerabilities, which could increase EM fragmentation, are other topics that investors need to monitor.
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