At Any Rate EM Fixed Income: Emerging Markets Outlook and Strategy: Hold reduced EM exposure into the summer as market pricing and positioning are downplaying risks
Jul 18, 2025
Jahangir Aziz is the Head of Emerging Markets Economic Research at J.P. Morgan, while Jonny Goulden leads their EM Fixed Income Strategy. They delve into the impact of U.S. tariffs on emerging markets, particularly comparing ASEAN nations with China. The conversation highlights the challenges in monetary policy shaped by inflation, along with the risks posed by credit spreads. They also discuss the interconnectedness of EM currencies with global trends, including the potential for recovery amid a fluctuating dollar. A must-listen for those interested in EM strategies!
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Uncertainty and Impact of U.S. Tariffs
- The U.S. tariffs uncertainty centers around the legal status of the IPA Act for implementation on August 1st.
- If tariffs proceed, average rates could rise from about 9% to above 20%, worsening growth impact on EM countries.
EM Central Banks Likely to Ease More
- EM central banks have cut rates more than expected due to benign dollar and domestic slowdown.
- They are likely to continue easing in the second half despite weaker growth and inflation uncertainty.
U.S. Inflation Drives EM Risks
- EM inflation uncertainty is mainly influenced by the U.S., not domestic EM factors.
- A weaker dollar has supported EM monetary easing despite concerns about U.S. inflation and policy.