JPMorgan USD Emerging Price, Forecast, Insider, Ratings, Fundamentals & Signals

July was an impressive asset-gathering month for ETFs. Much of the heavy lifting was done by the industry's largest ETFs.

During LSEG Lipper's fund-flows week that ended August 2, 2023, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the first week in three, removing a net $6.5 billion. Our fund-flows week kicked off on Thursday, July 27, with markets digesting the prior day's anticipated 25-bps rate hike from the Federal Reserve. Conventional taxable-fixed income funds realized a weekly outflow of $2.1 billion—marking their first weekly outflow in five weeks.

Central banks across emerging markets have reacted to elevated inflation by significantly tightening monetary policy, in some cases, well ahead of the U.S. Federal Reserve and the European Central Bank. After largely synchronized rate-hiking cycles across EM, monetary policies could once again begin to diverge among individual countries.

In emerging markets valuations look attractive today after the losses across financial markets early this year. PIMCO's investment process is founded upon our macroeconomic outlook and our in-house country and credit research.

Performance of emerging markets local currency bonds has been negatively impacted by the U.S. dollar's strength since mid-year, despite the higher real yields and upside growth surprises in many emerging markets. Currency returns can be volatile, and external factors can have a bigger short-term impact on an emerging markets currency (EMFX) even if relatively attractive fundamentals may provide longer-term support.

Emerging markets offer attractive alternatives to fixed income investors searching for yield amid the trillions of dollars of negative-, zero-, and low-yielding debt globally. Within emerging market hard currency investment grade bonds, we think it is prudent to be shorter duration or at least hedge the Treasury risk component, given the low yield per unit of duration today.

Past experience shows us that emerging markets have historically reacted positively to higher global rates, especially if the latter reflects an improving global growth outlook. Most emerging markets will start normalizing rates well before the U.S. and developed markets.

We do not expect faster growth to lead to a significant deterioration in most macro variables. The huge amount of negative-yielding debt globally will likely continue to encourage investors to increase allocations to emerging markets.

Today, China's economic recovery continues ticking along, and we are even seeing some indicators showing growth relative to last year.

During the COVID-19 crisis, investor flight to safety assets and a strong US dollar battered emerging market stocks this year.