On a more promising note, several emerging market countries have very high rates of vaccination. Indeed, from October 2021 to October 2022, the price of the Bloomberg Barclays US Aggregate Bond Index, which represents the vast investible universe of US bonds, has dropped almost 16%, essentially equaling the decline of the S&P 500 over the same time. Carefully consider the Funds investment objectives, risks, and charges and expenses before investing. We live that commitment through long-lasting partnerships, community-based delivery and engaging our best assetMorgan Stanley employees. Sustainability-linked bonds (SLBs) continue to emerge as the instrument of choice for many EM issuers, with $6 billion in Q1 2022 representing the second-highest quarterly issuance from this market segment to date and approximately 23% of global SLB issuance in the first quarter. Our base case is that interest rates are rising but economic conditions should remain strong. All information contained herein is proprietary and is protected under copyright and other applicable law. The credit profile is good.. The Emerging Markets Bond Fund was rated against the following numbers of Emerging Markets Bond funds over the following time . An ETP may trade at a premium or discount to its net asset value (NAV) (or indicative value in the case of exchange-traded notes). And, at the time of writing, the emergence of the Omicron Covid-19 variant is a growing concern. Thus, default risks may stay low, and short-duration high-yield debt, including bank loans, are vehicles that can capture higher yield while potentially reducing interest-rate risk. Milo Gunasinghe, emerging market strategist at JPMorgan, described the. Eaton Vance is part of Morgan Stanley Investment Management. Global X Management Company LLC serves as an advisor to Global X Funds. e.g. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. Theme 1: Virus and vaccines - a multi-speed economic recovery The draconian but necessary pandemic response of authorities everywhere sent the global economy into recession in March and April. Shes wary of high-yield debt because the yield spread to Treasurys, at around 300 basis points, is tight compared with historic averages, and high-yield debt is more vulnerable than other fixed income securities if the Fed moves more aggressively than expected inits tightening policy or if stocks fall. Markets stabilised somewhat over the past three months, but 2022 remains an annus horribilis1 for investors with both equities and government bonds posting negative returns so far this year. At the end of March, Russian securities were marked to zero by the Index provider and became untradeable due to sanctions imposed by western nations. Morgan Stanley helps people, institutions and governments raise, manage and distribute the capital they need to achieve their goals. Global institutions, leading hedge funds and industry innovators turn to Morgan Stanley for sales, trading and market-making services. In tandem with most sectors, it has suffered due to hikes in interest rates worldwide plus the fallout from Russia's . Given the broader bond outlook, Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, favors short-duration fixed income assets such as bank loans, which have adjustable rates that will rise along with increases in short-term rates, and investment-grade corporate debt maturing in five years or less. e.g. By Carol Liao, Lillian Lin, . At the same time, the smaller, 11-member Federal Open Market Committee (its short one member) said in its meeting statement: The path of the economy continues to depend on the course of the virus. Fidelity is not recommending or endorsing this investment by makingit available to its customers. From volatility and geopolitics to economic trends and investment outlooks, stay informed on the key developments shaping today's markets. From our origins as a small Wall Street partnership to becoming a global firm of more than 60,000 employees today, Morgan Stanley has been committed to clients and communities for 85 years. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the Portfolio will decline and may therefore be less than what you paid for them. Foreign securities are subject to currency, political, economic and market risks. Outlook NNIP emerging bonds. A minimum asset level is required. At the time, Russia had about US$100 million worth of interest payments for various USD- and EUR-denominated bonds due on May 27 with a 30-day grace period until June 26. Past performance is no guarantee of future results. John, D'Monte. or The main uncertainty is the outlook for the U.S. economy. S&P Global. building materials, as demand for and prices of real assets may increase. Global X Management Company LLC disclaims responsibility for information, services or products found on the websites linked hereto. Hong Kong: This material has been issued by Morgan Stanley Asia Limited for use in Hong Kong and shall only be made available to professional investors as defined under the Securities and Futures Ordinance of Hong Kong (Cap 571). Gross annualised rolling returns since incpetion. Emerging Markets Bond Index (EMBI) spread in selected Latin American countries in . e.g. The outbreak of the Russia-Ukraine War drove EM market turbulence in the quarter, with bonds of countries most impacted selling off. See how you can continue your career journey at Morgan Stanley. Federal Reserve Chairman Jerome Powell's "higher for longer" declaration cut short a decent summer rally for emerging market assets, particularly bonds. 2022 Outlook: Emerging Markets. Derivative instruments may disproportionately increase losses and have a significant impact on performance. Economy (Expanding) Citi Research's economists expect emerging market economies to slow from 6.8% year-on-year in 2021 to 3.6% year-on-year in 2022 as China's economy decelerates from 8.1% growth to 3.5%. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date of publication. Central banks in emerging markets have been well ahead of developed markets in raising rates to stem inflation risks. Technology Market Outlook . For important information about the investment managers, please refer to Form ADV Part 2. That could mean that the opportunity to add low-risk bond ladders to your income strategy may not be there if you wait too long. EMBDs benchmark index is the JPMorgan EMBI Global Core Index, which is a broad, diverse U.S. dollar denominated emerging markets debt benchmark that tracks the total return of actively traded debt instruments in emerging market countries. Green bonds accounted for 52% of all EM GSSS bonds in the first . Inflation risk -With relatively low yields, income produced by Treasuries may be lower than the rate of inflation. That's a vast pond for an active manager to traverse in search of the best opportunities. If there are any discrepancies between the English version and any version of this material in another language, the English version shall prevail. 2. From our startup lab to our cutting-edge research, we broaden access to capital for diverse entrepreneurs and spotlight their success. Analysis provided by Mirae Asset, as of June 30, 2022. Registered No. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. The criteria and inputs entered are at the sole discretion of the user, and all screens or strategies with preselected criteria (including expert ones) are solely for the convenience of the user. For example, the iShares J.P. Morgan USD Emerging Markets Bond ETF gives investors exposure to U.S. dollar-denominated emerging market bonds. Keep in mind that investing involves risk. - A + A. We value our commitment to diverse perspectives and a culture of inclusion across the firm. If you do nothing, you will be auto-enrolled in our premium digital monthly subscription plan and retain complete access for $69 per month. Why this is happening So why are bonds suddenly acting like stocks? Everything we do at Morgan Stanley is guided by our five core values: Do the right thing, put clients first, lead with exceptional ideas, commit to diversity and inclusion, and give back. It is a violation of law in some jurisdictions to falsely identify yourself in an email. Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Expect another strong year for deal-making, say Morgan Stanleys M&A bankers, as all the elements that drove 2021s record activity remain in place. Information regarding expected market returns and market outlooks is based on the research, analysis and opinions of the authors or the investment team. 11/02/2022. (Aug 25): Overseas investors are turning into net buyers of key emerging-market bonds in Asia for the first time in months, hinting at more significant inflows if the US Federal Reserve (Fed) goes for a more calibrated rate tightening. With global yields at historic low levels, EM debt is an income source. The subsequent website(s) may be governed by different privacy policies, terms and conditions, or regulatory restrictions. The iShares JPMorgan USD Emerging Markets . Create an alert to follow a developing story, keep current on a competitor, or monitor industry news. One of the best things . If inflation stabilizes as we expect in 2022, then both local emerging-market debt and currencies stand to appreciate as global investors become attracted to the yield, carry and potential returns from this asset class. These expectations of little or no capital appreciation and limited, though slightly higher, yields for bonds in 2022raise the question: Should investors still allocate assets to fixed income securities? We plan to continue moving up the credit quality spectrum by adding high-quality issuers while reducing our lower quality and high-beta exposures. This performance compares to a loss of 12.09% for the Funds benchmark, the JP Morgan EMBI Global Core Index (the Index) during the same period. At Morgan Stanley, youll find trusted colleagues, committed mentors and a culture that values diverse perspectives, individual intellect and cross-collaboration. For performance data current to the most recent month or quarter-end, pleaseclick here. The Funds lower duration relative to the Index, country selections and security selections were all positive contributors to performance, adding 91 bps, 91 bps and 23 bps, respectively.. This material is disseminated in Japan by MSIMJ, Registered No. The performance of emerging markets has been patchier in recent times. Since our founding in 1935, Morgan Stanley has consistently delivered first-class business in a first-class way. The 2022 GDP growth forecasts for most advanced and emerging economies have been revised down compared to April . Exchange-traded products (ETPs) are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments. Discover who we are and the right opportunity for you. EVMI is exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of the provision of financial services to wholesale clients as defined in the Corporations Act 2001 (Cth) and as per the ASIC Corporations (Repeal and Transitional) Instrument 2016/396. Russia continued to be a major underperformer due to its ongoing invasion of Ukraine. How to prepare for either scenario. The US 10-year Treasury rate rose by 66 bps to 2.98% at quarter end as inflationary data and further rate hiking expectations flowed through into the treasury markets. In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). We support credit card, debit card and PayPal payments. Emerging market commodity exporters such as Iraq and Oman continued to benefit from the rise in commodity prices due to Russias invasion of Ukraine and the associated impact to oil and gas supply. The performance data quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investors shares, when sold or redeemed, may be worth more or less than their original cost. At Morgan Stanley, giving back is a core valuea central part of our culture globally. We offer scalable investment products, foster innovative solutions and provide actionable insights across sustainability issues. Expert screeners are provided by independent companies not affiliated with Fidelity. In the global fixed-income market, issuance of green, social, sustainability, and sustainability-linked (GSSS) bonds (as defined in Box 1.1) reached US$1.1 trillion in 2021, almost double the US$596 billion in 2020. Economic uncertainties continue to weigh on markets, but the good news is that bond valuations are now back to attractive levels, with yields offering a powerful source of return potential. The indexes are unmanaged and do not include any expenses, fees or sales charges. Emerging Markets Q4 2022 Outlook Building in a new era of risks Strategy insights by Maritza Cabezas Ludena 29 September 2022 4 m. In these times of uncertainty and more expensive funding, a pragmatic approach requires cooperation and focus on what really matters. Returns varied, with sharp commodity price increases boosting the fortunes of some EM countries, particularly in Latin America, while parts of EM Asia grappled with . In 2022, investors could play EM opportunities in different ways. Where such a translation is made this English version remains definitive. the EM-DM growth gap should widen in favour of EM; and. Our insightful research, advisory and investing capabilities give us unique and broad perspective on sustainability topics. The experts are not employed by Fidelity but may receive compensation from Fidelity for their services. But, if inflation persists and becomes a bigger roadblock, the Fed may tighten financial conditions, contracting future growth and increasing default risk. Doe. Karl Lester M Yap Emerging-market assets are set to rise in 2022 as moderating inflation and accelerating growth trigger gains, but it won't happen until the second half of the year. Because higher interest rates mean higher bond yields, investors angst about how rates affect bond prices shouldnt obscure the fact that the return of rates to historically normal levels may present a long-awaited opportunity in bonds for those who seek income and principal protection. As an actively managed Fund, EMBD does not seek to replicate a specified index and is subject to increased credit and default risk, where there is an inability or unwillingness by the issuer of a fixed income security to meet its financial obligations, debt extension risk, where an issuer may exercise its right to pay principal on an obligation later than expected, as well as interest rate/maturity risk, where the value of the Funds fixed income assets will decline because of rising interest rates. Change the plan you will roll onto at any time during your trial by visiting the Settings & Account section. But another key criteria for strong returnsthat EM economies grow faster than DM economiesno longer holds. But another key criteria for strong returnsthat EM economies grow faster than DM economiesno longer holds. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Links to these websites are not intended for any person in any jurisdiction where by reason of that person's nationality, residence or otherwise the publication or availability of the website is prohibited. Please enter a valid last name. Russell 2000 Index is a market capitalizationweighted index designed to measure the performance of the small-cap segment of the US equity market. Additionally, financial intermediaries are required to satisfy themselves that the information in this material is appropriate for any person to whom they provide this material in view of that persons circumstances and purpose. We think a slowdown or mild recession are the two most likely outcomes. offers FT membership to read for free. We rely on our technologists around the world to create leading-edge, secure platforms for all our businesses. However, the pace of credit improvement is likely to slow throughout 2022, and there is more potential for weaker demand and increased bond supply in 2022 than in 2021. In general, the bond market is volatile, and fixed income securities carry interest rate risk. You should begin receiving the email in 710 business days. [WIRP function, over 150bps of hikes priced in for year end as at 30 June 2022]. In August, global funds have poured US$1.4 billion (RM6.28 billion . The growth in the fixed income market has been accompanied by a proliferation of new environmental, social, and governance (ESG . None of the other Eaton Vance group entities or affiliates holds any licences, approvals or authorisations in Singapore to conduct any regulated or licensable activities and nothing in this material shall constitute or be construed as these entities or affiliates holding themselves out to be licensed, approved, authorised or regulated in Singapore, or offering or marketing their services or products. Life Settlement Players Say They Still Have Room to Grow, AmeriLife Agrees to Acquire Allianz Life Distribution Arm, The Fed's Silver Lining for Retirement Portfolios, Powell Sees Higher Peak for Rates, Path to Slow Tempo of Hikes, Record Powerball Jackpots Are Teachable Moments for Pension Participants, Fed Hikes Again by 75 Basis Points, Hints at Entering End Phase. Among non-financials, we like BBB-rated corporate bonds; we are cautious on those with ratings of A or above, which tend to have longer-duration maturities and are more interest-rate sensitive. A quick look at asset class performance following the 3 most recent elections: In the 2016 elections when Trump beat Clinton against most expectations, the immediate knee-jerk reaction was "sell everything" with equities and Treasuries, and USD sinking. Please be aware that this Portfolio may be subject to certain additional risks. EM-DM growth alpha should normalise gradually head- ing into 2023. SEI Investments Distribution Co. (1 Freedom Valley Drive, Oaks, PA, 19456) is the distributor for the Global X Funds. U.S. economic data disappointed, with flash PMIs for October dropping to around 47 for the U.S., UK and euro area. The 10-year yield fell -20 basis points (bps) to end the week at 4.02%. After lagging in 2021, emerging-market debt has a lot of room for improvement this year. Source Nikko AM, as at 30 September 2022. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. Compare Standard and Premium Digital here. . Dubai: MSIM Ltd (Representative Office, Unit Precinct 3-7th Floor-Unit 701 and 702, Level 7, Gate Precinct Building 3, Dubai International Financial Centre, Dubai, 506501, United Arab Emirates. university (As interest rates rise, bond prices usually fall, and vice versa. The Index tracks liquid, US dollar emerging market (EM) fixed and floating-rate debt instruments issued by sovereign and quasi-sovereign entities. Such links are provided as a convenience. You may also opt to downgrade to Standard Digital, a robust journalistic offering that fulfils many users needs. Current performance may be higher or lower than the performance quoted. Outside the EU, MSIM materials are issued by Morgan Stanley Investment Management Limited (MSIM Ltd) is authorised and regulated by the Financial Conduct Authority. Returns are based on a representative account of the Global Unconstrained Bond strategy. Still, we believe that most emerging economies' underlying structural growth trends will continue to drive corporate earnings and returns for investors over the medium-to-long term. This publication has not been reviewed by the Monetary Authority of Singapore. Global GDP is expected to jump another 5% in 2022, fueled by additional support from central banks and the pent-up savings by businesses and consumers. The trajectory of the coronavirus pandemic and fate of President Biden's economic plan could upend those expectations. Copyright 1998-2022 FMR LLC. Increased volatility may create opportunities to buy higher-yielding, lower-risk bonds at attractive prices. Global X Funds are not sponsored, endorsed, issued, sold or promoted by JPMorgan, nor does JPMorgan make any representations regarding the advisability of investing in the Global X Funds. High-yield securities (junk bonds) are lower-rated securities that may have a higher degree of credit and liquidity risk. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. Among corporate bonds with a relatively low risk of default, we see the most return potential in financials, which could benefit from interest-rate hikes. It includes approximately 2,000 of the smallest securities in the Russell 3000 Index. As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. The global presence that Morgan Stanley maintains is key to our clients' success, giving us keen insight across regions and markets, and allowing us to make a difference around the world. Currency exchange rates can be very volatile and can change quickly and unpredictably. Eaton Vance Management International (Asia) Pte. Emerging-market debt face three main challenges in 2022: a reduction in the provision of global liquidity, lower structural growth and contribution to global demand from China, and unsustainable debt levels for some of the more indebted economies. If you're considering individual bonds, you should know that the bond market is large and diverse and getting the best prices can be tricky.