Investment grade and high yield credit in emerging markets have delivered divergent performance over the summer. Could this trend reverse, or is investor caution warranted in the high yield space?
A relatively benign G20 summit and expectations for easier financial conditions ahead have boosted demand for emerging market debt. However, areas of value can still be found.
Chart of JPM's long-term capital market return assumptions. Deleveraging will depress growth while risk assets should offer decent returns
Dovish central banks, strong fundamentals and an improved outlook for China suggest that all stars are aligned for emerging markets. How long can the year-to-date rally continue?
Executive summary of JPM's long-term capital market return assumptions for 2013
Full report detailing JPM's long-term capital market return assumptions for 2013
We emerged with a cautious near-term view from our latest quarterly strategy meeting in early September. In our base case scenario, the global economy is expected to narrowly avoid recession and continue to grow, albeit much more slowly.
We may not be outright US dollar bulls, but fundamentals and quantitative valuation factors both suggest that investors are currently too negative on the currency.
Emerging market debt is underpinned by a solid fundamental backdrop, but the local index is at all-time tights. A differentiated approach seems warranted.