Emerging Markets

Equity investors are facing monumental questions about their allocation strategies in a new market regime. Market concentration has risen sharply, valuations have climbed to record highs in parts of the market and factor volatility has dominated returns.

Recent market volatility and the conflict in Iran have understandably pushed many emerging market investors to the sidelines. But periods of uncertainty have historically offered attractive entry points into emerging market debt (EMD), particularly when underlying fundamentals are improving and asset flows are likely to increase.

On the surface, last week looked engineered to embarrass our positioning. The dollar index climbed to a six-week high above 99.3 by Friday and finished the week roughly flat at those levels.

An unexpected rap on your front door is sometimes cause for anxiety. You are not sure who or what is out there, wanting to get in.

In a relatively light week for traditional economic data, a mix of corporate earnings, business surveys, Federal Reserve minutes, and the latest read on the consumer from the University of Michigan helped paint an increasingly clear picture for investors.

The push for international equities diversification continues amid shifting global macroeconomic conditions. These days, investors have more options when it comes to international exposure. Given the current market uncertainty, they may want to put quality at the forefront of their decision-making process.

The artificial intelligence (AI) boom has transitioned from an equity market narrative to a defining force in fixed income. Hyperscalers (Amazon (AMZN), Alphabet (GOOG/L), Meta (META), Microsoft (MSFT), and Oracle (ORCL)) are shifting from internal cash flows to substantial bond issuance to fund massive data center, graphics processing unit (GPU), and power infrastructure buildouts.

Contrary to what legal television series portray, verdicts rarely turn on a single moment of drama. They take shape gradually, as evidence accumulates and a broader narrative comes into focus.

US growth stocks underperformed in early 2026 amid AI disruption fears and an unresolved conflict in the Middle East. But these stresses could create favorable conditions for selective, diversified investors to unlock long-term growth potential in a rotating market.

Chris Galipeau discusses high-conviction insights that go beyond media headlines.

After three decades of watching market cycles play out from both sides of the trade, I’ve come to a simple conclusion: Wall Street’s love of simple rules is one of the most dangerous aspects of investing.

Global equity markets moved modestly higher this week as first-quarter earnings season continued to deliver strong results.

Despite the move lower late last week, U.S. Treasury yields are still holding well above recent lows and close to highs not seen in more than a year. By contrast, risk assets are firmly bid: U.S. equities have been routinely touching new historical highs, and credit spreads over Treasuries remain tight.

Gold has dropped more than 11 percent from its all-time high of just over $5,102 an ounce in January, and selling pressure continues to dominate the market. A well-established mainstream narrative is driving the bearish sentiment.

Despite these higher costs, a projected 45 million Americans are expected to travel at least 50 miles from home this weekend, setting a new record. Close to 40 million will drive while some 3.7 million will fly.

You don’t have to go very far to find lots of negative commentary in the popular press about the current state of the US economy. High gas prices (due to a “war of choice”) are squeezing consumers’ budgets, and so the economy is headed for a ditch.

Yes, we have been there before, only to be disappointed. But the market smells a real settlement to open Hormuz, and WTI oil briefly dipped below 90 for the first time in weeks. If an opening occurs, expect the market to continue its march upward, as the momentum trade gathers strength.

Despite headwinds from rising oil prices, fundamentals have remained strong. The S&P 500 has notched 18 record highs year to date and, more importantly, surpassed our prior target of 7,250. Following a standout 1Q earnings season, we are raising our 2026 earnings per share (EPS) estimate to $326 from $300.

Last Friday closed with the 10-year Treasury yield at 4.60%, a one-year high, and the doom commentary about rising interest rates was waiting before the bell even rang. Hyperinflation. Bond market breakdown. Paradigm shift. A 1981 fair-value retest.

Since the post-COVID recovery began, U.S. nonfinancial corporations have generally managed capital conservatively. They have kept credit metrics stable and, in many cases, actively improved them. That discipline was not entirely voluntary: The sharp adjustment in funding costs triggered by the Federal Reserve’s 2022–2023 rate hiking cycle raised the bar for incremental borrowing and pushed management teams toward balance sheet restraint.

During the American cigar craze of the 1990s, a couple of my neighbors purchased humidors and began collecting. The holy grail for them was Cuban Cohibas, banned from import by longstanding U.S. sanctions.

I have often written about one of the few indicators in economics that has earned its reputation over the years, and for good reason. It has preceded virtually every US recession since World War II. I’m talking about the inverted yield curve.

Now, that prospect feels much farther off. Indeed, as government debt grows and macroeconomic pressures and inflation reemerge, investors face a complicated rate environment. Dividends can provide a solution.

In this second quarter update, Western Asset believes global fixed-income markets face a more complex backdrop as geopolitics, rapid AI adoption and private credit scrutiny intersect.

For private equity firms, capital flexibility is prized today. Merger-and-acquisition (M&A) activity has cooled, while commodity prices and artificial intelligence (AI)-driven disruption have heated up, creating uncertainty for investors. This makes it more challenging to sell portfolio companies, so private equity firms are holding investments longer. As a result, many firms are turning to net asset value (NAV) loans for capital needs.

By moving beyond benchmark constraints, active portfolios can access off-the-run bonds, specific securitized tranches, and maturity buckets with superior risk-reward profiles. They also have the flexibility to adjust positioning throughout the market cycle — reallocating across sectors, ratings, and issuers as conditions evolve to capture opportunities and mitigate drawdowns.

I still don’t think the Fed is close to a rate hike, but for the upcoming June FOMC meeting, a shift in the language of the policy statement from an easing bias to one of a ‘balanced’ outlook seems to be the most likely scenario. However, the fed funds futures market has now fully priced in a rate hike for March 2027, a remarkable shift from its pre-war status of discounting almost three rate cuts for the same timeframe.

Recently, Matthew Bartolini, global head of research strategists at State Street Investment Management, sat down with VettaFi to discuss where inflation stands, opportunities within portfolio construction, and much more.

From the April payroll report released on May 8, we realize that not all industries are equally impacted by AI. Diagnostic imaging centers, an area where AI is thought to replace humans, have increased demand for workers, whereas bookkeeping demand has declined in recent years.

Global bond yields are reaching frightening levels due to the continued war in Iran and the effective closure of the Strait of Hormuz. Continued high oil prices and the threat of reverberating inflation are causing investors to demand higher yields on government bonds.

Equities advanced in April, but hedges remain few and far between, as traditional risk mitigants like bonds and gold continue to show a correlation with stocks.

Sustainable investing in fixed income has come of age. Against a backdrop of heightened geopolitical tensions, persistent economic and trade uncertainty, sustainable fixed income continued to demonstrate its appeal in 2025.

Stocks’ rally off the March 30 lows has been nothing short of wild, with internal market dynamics showing some performance divergences that we haven’t seen for decades. For example, in the first 6 weeks of the rally, the S&P 500 Growth index beat the S&P 500 Low Volatility Index by more than any other 6-week window on record.

Emerging markets (EM) are using low-cost renewables to cut fuel imports, stabilize power costs and improve energy security—positioning EM as the growth engine of the energy transition. Countries and companies that leverage their dominance in critical minerals and green technology could pull ahead, creating dispersion in potential outcomes for investors.

Model portfolios are a key pillar for asset managers competing for advisor and investor attention. They offer straightforward, pre-packaged tools that help investors target and achieve specific financial goals. Designing and operating models, however, takes a particular set of skills. Goldman Sachs Asset Management recently made a big hire therein.

In the past year, new models from industry leaders have continued to boost AI’s capabilities. According to various capabilities tests, Anthropic’s Mythos model has leapfrogged other AI models – including in the ability to thwart or support cyberattacks.

Right now, AAI’s two highest 10-year expected return forecasts are for large-cap value equity strategies outside the United States—Emerging Markets RAFI and Dev ex US Large RAFI. AAI’s expected return model anticipates valuations for equity strategies to mean revert and therefore tends to elevate out-of-favor regions and styles, predicting higher future returns for recently underperforming equity indices.

LPL Research examines rising inflation risks amid geopolitical tensions, while resilient growth and strong investment support continued expansion.

It’s human nature to allow familiar patterns to guide our decision-making processes. But it’s just as important to recognize when changing conditions warrant a rethink. Return patterns in global equity markets appear to be shifting in ways that should prompt investors to revisit their allocations.

Inflation surged higher in April, with the Consumer Price Index (CPI) jumping 3.8 per cent from 3.3 per cent in March and the Producer Price Index (PPI) up six per cent from four per cent in March. The increase in the CPI owed much to energy and food prices.

Nineteenth-century oil processing plants used simple, column distillation of crude oil to produce kerosene, which was in high demand for lighting lamps. The process also yielded a dangerously flammable byproduct called gasoline which had no obvious use.

Chris Galipeau discusses high-conviction insights that go beyond media headlines.

Markets ended last week under pressure as the optimism that had been building around a potential geopolitical breakthrough faded quickly. The China summit did not deliver the progress that had been hoped for. The Boeing aircraft order was smaller than expected; there was no meaningful movement on Iran; the Taiwan issue was brought forward in a way that unsettled markets; and the hoped-for easing of tensions around the Strait of Hormuz did not materialize.

One thing most people don’t know is that prior to the invention of the Fed, other than during wars, there was almost no inflation. Various sources including the Federal Reserve regional banks show the purchasing power of $1 in 1900 was the same as or higher than it was in 1800.

Emerging market debt is compelling as a medium‑term structural allocation, particularly for investors seeking to diversify away from concentrated U.S. exposures.

If Donald Trump and Xi Jinping's Beijing summit produces a sustained Sino-American trade truce and a path to reopening the Strait of Hormuz, that will give the world economy something it has lacked for the past year and half: a reduction in tail risks. In a year when so much has gone wrong, that is a welcome prospect.