Is the Old Lady going too slowly?
Russell Silberston discusses how the Bank of England is an international outlier in relying on models rather than data to anticipate inflation
29 Sept 2020
The pandemic has sparked some doom-laden predictions about EM economies. To assess their ability to weather the COVID-19 storm, we take a deep dive into EM fundamentals from a fixed income investor’s perspective.
Although the coronavirus struck at the end of a challenging decade – with the developing world buffeted by China’s slowdown, a reversal in capital flows and political headwinds in some key markets – EM entered the COVID crisis in resilient shape.
Consequently, we believe this global crisis will have a negligible longer run impact for most EMs. In fact, as the world emerges from the COVID recession, we think these markets will be well positioned to benefit from the recovery in a low-yielding world.
However, the gaps between the strongest emerging nations and the weakest is widening. While we expect EM overall to outperform developed nations, investors will need to take a careful and selective approach to building an EM debt portfolio.