Global Fixed Income Strategy - March 2024


Unlocking continued EM performance: Assessing US and China impacts
This year’s big surprise has been the resilience of global growth, especially in the US, making a long-awaited recession unlikely. Emerging markets (EM) have also displayed remarkable growth resilience, despite restrictive domestic interest rates and China’s wobbles. A global soft landing, including in the US, remains our baseline forecast and would be supportive of EM, in our view.
Nevertheless, uncertainty about US interest rates and slower Chinese growth have dampened sentiment toward EM. Going forward, we believe US interest rate cuts will be the primary catalyst for unlocking further EM performance, even in the event of a shallow cutting cycle. We view greater stability in China as another positive factor for EM. Though less impactful than US rate cuts, potentially easier Chinese monetary and fiscal policy in the second half of the year could provide a supportive backdrop for EM.