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2022 Outlook
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January 18, 2022

Unearthing opportunities in an altered landscape

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January 18, 2022

Unearthing opportunities in an altered landscape


2022 Outlook

Unearthing opportunities in an altered landscape

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January 18, 2022

 
 
"
For every country like Turkey, where heterodox policy is cause for concern, there are lesser known and overlooked EM success stories.”
 
 
 

Boston – In 2022, we expect emerging markets may embark upon a road to recovery, albeit with potential bumps along the way. While slower but ongoing recoveries in economic growth and global trade combined with reasonably attractive valuations for emerging-markets (EM) debt should act as tailwinds. That said, continued headwinds from higher inflation, tightening monetary conditions, developments in China and uncertainty linked to the evolution of COVID-19 will likely remain challenges.

Ultimately, the broad and diverse nature of the EM universe means that these trends will play out differently at the individual country level.

Global Growth Supportive Despite Vulnerabilities

After a brisk expansion in global economic activity in 2021, growth is set to moderate to slightly less supportive levels this year. Global demand conditions remain relatively strong, with business activity still recovering from the pandemic-induced lockdowns. Less positively, however, the economic jolt of re-openings has been met by capacity constraints in developed and emerging economies, which is whipping up price pressures.

In response, the world’s central banks are gradually abandoning pandemic-era stimulus in a move to normalize monetary policy. The U.S. Federal Reserve (the Fed), which has started tapering its asset purchases already, is expected to hike rates three times in 2022. Here, it is important to highlight that despite increases, rates will remain at extremely accommodative levels. Furthermore, with three hikes anticipated, it is unlikely that the Fed will surprise with more aggressive policy action, in our view. 

 
 
John Baur
John Baur
Co-Director of Emerging Markets, Portfolio Manager - Eaton Vance Management
 
 
Marshall Stocker
Marshall Stocker
Co-Director of Emerging Markets, Portfolio Manager - Eaton Vance Management
 
 
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Emerging Markets
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According to Co-Director of Emerging Markets Marshall Stocker at Eaton Vance Management, markets have largely priced in the risks facing emerging markets debt, and valuations look much more compelling — allowing our diverse and global investment team to capitalize upon many unique and differentiated country opportunities.
 
 
 
 

Risk Considerations

Investing entails risks and there can be no assurance that any strategy will achieve profits or avoid incurring losses.

Emerging Markets Debt - The value of investments may increase or decrease in response to economic, and financial events (whether real, expected or perceived) in the U.S. and global markets. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical, currency exchange rates or other conditions. In emerging or frontier countries, these risks may be more significant. Investments in debt instruments may be affected by changes in the creditworthiness of the issuer and are subject to the risk of non-payment of principal and interest. The value of income securities also may decline because of real or perceived concerns about the issuer’s ability to make principal and interest payments. Exposure to derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other investments. As interest rates rise, the value of certain income investments is likely to decline. The value of commodities investments will generally be affected by overall market movements and factors specific to a particular industry or commodity, including weather, embargoes, tariffs, or health, political, international and regulatory developments.

Important Information

Date-of Data: December 27, 2021

There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.

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