CoreMacro
| Emerging Markets
Research on emerging economies, from in-depth country reports to calls on EM stocks, bonds, and currencies.
The global risk-off phase will persist. It is too early to buy local-currency bonds in Mainstream EM, but it is not too late to sell EM sovereign and corporate credit (USD bonds).
Overstretched foreign inflows into Brazilian markets will reverse, while soaring oil prices will not benefit Brazil in the near term. Avoid the country’s risk assets and the BRL, and stay underweight Brazilian equities and fixed income relative to EM. We also recommend paying 10-year Brazilian swap rates.
Indonesian rupiah will continue to plunge, and its local-currency bond yields will rise materially. Investors should short domestic bonds, currency unhedged.
Oil prices will likely rise in the near term, irrespective of developments in the Strait of Hormuz. Given that global share prices have become correlated with crude prices, global stocks will continue selling off. Go short the EM equity index and take profits on our open trades that have benefited from the global risk-on environment.
In the ongoing Middle East crisis, anti-fragile markets will remain relatively resilient while fragile markets will break. We describe how to draw the distinction. Plus, a new trade is a 50:50 combination of long USD/MXN and overweight Consumer Discretionary.
Avoid EM and DM risk assets. In the near term (one-to-three months), the odds favor US equity outperformance and a US dollar rebound. Nevertheless, the cyclical outlook (nine-to-12 months) warrants underweighting US equities and staying short the greenback.
India is seeing net capital outflows for the first time in a generation. The central bank is selling foreign reserves to defend the rupee, which is draining banking system liquidity. The latter risks derailing the nascent credit revival. Indian stock prices remain vulnerable.
Go long LATAM ex. Brazil banks / short global bank stocks. Brazilian bank equities will underperform due to poor and worsening macro fundamentals.
The US and Japan are in the same predicament: save the bond market or save the stock market? How this predicament will be resolved is the biggest global macro call of 2026-27. Plus: a new tactical trade is to go short AUD/JPY.
Egypt’s underlying inflation pressures are much higher than the headline CPI numbers imply. Real interest rates have plunged. As such, domestic bond yields have stayed high for a reason. Steer clear.