Resilience and a growth advantage over developed markets make emerging countries an attractive destination for the second half of the year. The effects of monetary tightening are seeping through to the real economy, contributing to lacklustre growth, particularly in developed economies.
The U.S. economy may suffer a mild recession towards the end of this year, while European growth should fall below potential as the continent grapples with the sticky core inflation that is constraining consumption.
- Despite recent China woes, emerging markets are poised to enjoy a growth advantage over developed peers, creating opportunities for investors across all major asset classes.
- Countries in Latin America are paving the way for a bout of monetary policy easing in the second half of the year; the prospect of lower interest rates has helped lower local government borrowing costs.
- Emerging market bonds and currencies remain appealing this year. In equities, valuations are more attractive, but a selective approach is key.
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