From Morningstar: 2024-09-18 19:09:00

The upcoming U.S. presidential election is causing uncertainty in global markets, especially in emerging market debt. The impact will be felt in areas like fiscal policy, trade policy, and foreign policy depending on the election outcome.

Increasing U.S. tariffs could affect emerging market bonds denominated in dollars. A rise in tariffs may lead to dollar appreciation, affecting countries like China and Mexico, but also potentially benefiting others like Vietnam. The outcome of the election will influence these policies and their effects on markets.

Foreign policy changes in the U.S. could have varied effects on emerging debt markets. From Ukraine to Latin America, different countries could see increased credit risk or potential benefits depending on the direction of U.S. policy. Despite the election focus, factors like the Federal Reserve and economic fundamentals are crucial for emerging bond markets.

Managers recommend strategies to navigate uncertainties ahead of the U.S. elections. Investors are advised to focus on maintaining credit and rate risk while reducing foreign exchange risk in flexible portfolios. Differentiating between hard currency and local currency emerging bonds can also be key in managing portfolios amid election uncertainties.

With the unpredictability of the election outcome, managers are cautious but optimistic about emerging debt strategies. Maintaining a mildly positive stance on interest rates and exploring value opportunities in regions like Europe, Africa, and Asia can help investors find stability and growth in their portfolios. Staying diversified and informed will be essential in navigating the complex global market dynamics.



Read more at Morningstar: What the U.S. Election Means for Emerging Market Debt