EM Fixed Income: Emerging Markets Outlook and Strategy: Hold reduced EM exposure into the summer as market pricing and positioning are downplaying risks

In this episode of the At Any Rate Emerging Markets Focus podcast, Luis Oganes, Jahangir Aziz, and Jonny Goulden discuss the outlook for emerging markets in the coming months. Jahangir addresses the uncertainty surrounding U.S. tariffs and their potential impact on EM growth, noting that current tariff rates are worse than initially assumed and could significantly affect ASEAN economies. He also points out that EM central banks have been cutting rates more than expected due to domestic economic slowdown and a weaker dollar, and anticipates further rate cuts. Jonny discusses market pricing, noting that markets are not pricing in much risk premium, particularly concerning tariffs and potential growth deceleration. He highlights the asymmetry in EM credit, where spreads are near 17-year lows, and suggests caution in EM fixed income assets, while also noting a tactical shift to neutral on EM currencies due to overbought conditions in the short term, despite a longer-term bullish view.