A synchronized global cyclical uptick, rather than standout US performance, is expected in the second half of the year. This dynamic is favorable for emerging markets as it reduces upward pressure on the US dollar, preventing significant interest rate divergence and supporting EM currencies.
Emerging market sovereign credit spreads are expected to remain stable, even if the Federal Reserve raises interest rates. The rationale is that any potential rate hike would be driven by strong economic growth, a factor that fundamentally supports and anchors credit markets, outweighing the negative impact of tightening policy.
A tragic earthquake in Venezuela has indefinitely postponed the country's highly anticipated debt restructuring process. The release of crucial economic data and a Debt Sustainability Analysis (DSA), which investors expected as soon as this week, is now on hold as the nation shifts focus to disaster recovery.
Emerging market corporate EBITDA is forecast to grow by a robust 30% this year, far outpacing previous years. While led by Industrials, Metals & Mining, and Oil & Gas, the underlying strength is broad. Even excluding these top-performing sectors, growth remains solid in the mid-to-high single-digit range.