CoreMacro

India’s intake of industrial commodities is 10-to-20 times as small as China’s. Capital goods are five times as small. Hence, India is not in a position to offset any decline in Chinese demand for these commodities and goods.

The bear market in US bonds will likely end with a bang rather than a whimper. Even during the secular US bond bull market of 1982-2021, cyclical bond bear markets ended only after an eruption of financial turmoil. It would be strange if this current ascent in bond yields ended without significant casualties in the global financial system.

Despite higher oil prices, Colombian risk assets will underperform their EM peers in the months ahead. The domestic economy is evolving from stagflation into recession, and fiscal and political risks will raise the risk premium of Colombian assets. Take profits on the yield curve inversion trade and stay short COP vs. USD.

The global downturn will be shallower than it was in 2008 and in 2020 but will last for longer. The primary reason for a more prolonged downturn is that policymakers in the US, Europe, and China will be reluctant to proactively and aggressively stimulate. The combination of rising oil prices, an appreciating US dollar, and mounting US bond yields constitutes a triple whammy for US share prices.

Real wages are set to rise in CE3 economies with implications for their asset markets and currencies. Of the three, Polish assets and the zloty are the most vulnerable.

If we look at global growth as an aircraft, the plane is experiencing failing engines and will lose more altitude in the coming months. Yet, neither Chinese authorities, nor the Fed or the ECB will be quick to come to the rescue as global growth downshifts. These dynamics herald a stronger US dollar and lower EM risk asset prices.

Special Report

Contrary to the widespread belief in the investment community, the global copper supply-demand balance is no longer in deficit. Red metal prices are set to decline by another 10-15% as the global copper market will shift to a larger surplus in the next six months.

Special Report

In part 2 of this series, we discuss mainstream EM equity valuations and present the results of our cross-country analysis. The goal is to identify overweights and underweights within an EM equity portfolio.

While it may be tempting to bottom fish, we advise that investors maintain a cautious stance on Argentinian sovereign credit. Even though the election of a right-wing candidate in the coming months may boost investor sentiment, the country still faces major headwinds: more currency devaluation, and another possible default/debt restructuring.

Indian stocks have gone up this year even as the broader EM markets have been falling. How long can Indian markets continue to rise?