Sharing our convictions

Emerging markets have just weathered two major global shocks — and have come out on top. We believe this is no accident. Many investors missed the post-Liberation Day rebound by staying anchored in a framework that may no longer describe the emerging-market universe. The same misreading risks compounding potential portfolio under-exposure today.

We believe EM fixed income is better positioned today than four years ago, despite uncertainty around the duration of the war and the disruption of oil supply. If de-escalation materializes in the short term, EM bonds may rebound amid a resumption of pre-war trends, including diversification away from US-centric portfolios.

Korea’s governance reforms tackle the 'Korea discount' by enhancing transparency and minority shareholder rights. Measures like mandatory treasury share cancellations and stronger board independence aim to unlock corporate value and drive fairer valuations. A pivotal step toward more equitable markets.

Emerging market equities enjoyed an impressive year but have investors missed the boat? We don’t think so. In fact, we believe 2025 marked the first year of positive change for at least two key structural factors, which could spark the beginning of a new positive cycle for EM equities.

2026 began with the global acknowledgement that the TACO mantra (Trump Always Chickens Out) does not apply to foreign policy. We believe this sends a clear message to leaders of small and medium-sized countries opposing or refusing to cooperate/negotiate with the Trump administration.

You can now watch the replay of our webinar: Charting the Path for Fixed Income in 2026.

Looking ahead, we expect continued inflows, rising demand, and reduced supply to support EM hard-currency bonds. For EM local-currency bonds, we believe the current macroeconomic environment remains favorable, despite our conviction in a USD bear market being lower than it was a few months ago.

Following years of underperformance, emerging market equities are leading global markets in 2025 to date, driven by a softer US dollar, policy reforms, and renewed investor confidence. With valuations still discounted and structural tailwinds in place, this rally signals a potential long-term shift in global equity dynamics.

You can now watch the replay of our webinar: The new multi-plural world: Macro divergence meets yield

With strong fundamentals, broad region and sector diversification, and a track record of weathering financial crises, emerging-market investment-grade (EM IG) bonds have evolved into a high-quality asset class, in our view. Yet, despite a robust risk-return profile, EM IG remains significantly underrepresented in actively managed, dedicated strategies.

Recent market volatility has reinforced the value of alpha over beta. While markets rebounded from recent lows, risks persist – from uncertain trade policy to concerns about debt sustainability. But fixed income remains resilient. We are finding opportunities in local currency EM debt, US high yield, and European investment grade credit.

The US dollar’s reign is faltering, and we believe a prolonged dollar bear market is underway – a scenario that has historically been a tailwind for emerging market economic growth and asset valuations. However, not all emerging equity markets respond equally to the dollar’s decline.

Emerging market (EM) equities are more domestically driven than commonly assumed. Companies in the MSCI EM Index derive over 60% of revenues in their home markets. And they could further reduce their dependence on exports in the future. We illustrate the reasons.

We remain cautiously optimistic about Fixed Income returns. Tail risks are elevated, which dampens our confidence in “risk on” markets. But alpha opportunities still await risk-aware, active investors. Those who try to predict the next major macro shift may find themselves echoing Luke Skywalker’s words, “your overconfidence is your weakness.”

New world order with Trump 2.0 at the helm. New day, new risks. What’s keeping investors awake at the moment and how does this impact EM Fixed Income?

The driving force behind this performance is the Chinese tech sector, fuelled by hopes that a larger adoption of AI could boost earnings. A confirmation of improved earnings, the resurgence of consumption confidence and sequential stabilization of the overall economy will be needed to solidify and extend the recent rally.

2025 is poised to be another positive yet complex year for equities. Balancing core positions in industries driven by secular trends – like semiconductors, AI hyperscalers, and the energy transition – with opportunistic exposures that can benefit from cyclical or policy-induced rebounds can help navigate the challenges ahead.

Conditions are currently favorable across fixed income markets. But pockets of volatility and risk aversion will challenge even the most skilled investors. The silver lining? We expect risk-conscious, active investors can generate alpha opportunities in 2025 similar to those achieved this year.

The new Trump administration’s policies evoke both optimism and apprehension among investors. This uncertainty is exacerbated by the pressures on the US consumer, high market concentration, and potential earnings disappointments. We highlight key themes we believe are worth watching in 2025.

Markets have been on the move since the US presidential election. However, we think lower funding costs thanks to tightening spreads and the prospect of returning flows are proving supportive of EM debt. But there will be winners and losers in the new regime…

Watch our livestream where Jean-Louis Nakamura, Head of Vontobel Conviction Equities, hosts a discussion between Viktor Shvets, Head of Global Desk Strategy at Macquarie and Anthony Corrigan, Client Portfolio Manager, about the role that emerging market (EM) equities play in today’s global equity portfolio and what key factors need to be considered when building a resilient EM equity portfolio.

Find your footing amid ever-changing conditions with Vontobel’s new Fixed Income Quarterly. The launch edition finds our Fixed Income team feeling very balanced, very buoyant, and very bold. Read on to discover why.

This latest article from Fixed Income explores the potential of Emerging Markets (EM) in the current economic landscape, despite significant outflows and perceived risks. Despite outflows and perceived risks, EMs offer promising opportunities for fixed income investors.

From the potential for maintaining a status quo that has delivered stability and decent returns in the last few years, to the risks of renewed volatility during a potential second Trump presidency, our latest article from Fixed Income on the upcoming elections in Mexico provides a comprehensive analysis.