Thanks to consistently accommodating financial conditions, the relatively elevated market valuations of recent months have been able to sideline these uncertainties, benefiting instead from the attractive prospect of a U.S. soft landing AND sizeable Fed rate cuts in the next 12 months. This is also why we believe that cautious security selection and solid structuring are key to the resilient portfolios needed to navigate what on the surface appears to be a favorable equilibrium, but underneath, has notable elements of potential volatility.

…we believe the upcoming easing cycle by the Federal Reserve represents a significant opportunity for EM debt. Historically, EM debt has performed well following U.S. rate cuts, and with EM central banks likely to lower rates to stimulate growth, the asset class is well-positioned for strong returns. Attractive yields, supported by solid fundamentals and a rebound in global risk sentiment, further enhance its appeal…