Global Funds Outlook | Fourth Quarter 2019

Summary

We expect ongoing easing in global uncertainties, and policy support to sustain flows into EMs, mainly those implementing ‘sound’ policies and with stable currencies. However, concerns over underlying vulnerabilities and the potential for further bouts of cross asset volatility will restrain a sharp recovery in EM inflows.

Key points

• Key points:
• The global economy and markets remain susceptible to shocks, fueled by trade tensions, geopolitical frictions and idiosyncratic issues.
• Reassuringly, recent progress on US-China trade talks and Brexit, easing US recession concerns and policy easing has revived investor sentiment.
• The need for resiliency in wake of prolific risk off episodes continues to drive core developed market (DM) bond inflows. Search for yield has fueled debt flows to periphery Europe and emerging markets (EMs).
• Demand for high yield and IG credit is robust, while sovereign bonds are losing sheen although are still an effective cushion during risk-off.
• Flows to money markets remain elevated. We see some rotation towards equities but not a clear appetite for EMs yet.

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