2022 has been the year of the permacrisis, with spiralling inflation, rising interest rates, the invasion of Ukraine by Russia, an energy shock in Europe, the Covid pandemic limping on and zero-Covid policies hobbling China, volatile markets and collapsing valuations; all of which has disrupted even the most thoughtful and best-laid plans of investors and policy makers.
For our 2023 Global Investment Themes, our analyst team has sifted through the damage, finding the green shoots of opportunity and uncovering the emerging new risks. Click on the titles below for the in-depth reports.
As the world’s largest central banks continue playing catch-up with runaway inflation, it is easy to forget that some of their emerging market peers have been much more proactive and are now starting to ease their feet off their monetary brake pedals. Our new scorecard shows where the tightening cycle may be closest to ending.
After an extremely challenging year, some might say EM fixed income has lost its shine, in the context of inflation at multi-decade highs around the world and with global interest rates heading to their highest since the global financial crisis. However, there are four important reasons to be optimistic.
Structural reform is a powerful driver of the long-term investment case in emerging markets. However, it is sorely lacking at the moment as countries prioritise crisis management – Covid-19, high fuel and food prices, elevated sovereign debt across most of EM and climate emergencies – over long-term fundamentals. Which countries will find the political space to implement much-needed root and branch changes?
The theory that output per capita tends to grow faster in poorer economies than in richer ones, leading to a convergence in per capita incomes over time, has enjoyed widespread currency in the literature on economic development in recent decades, but the pandemic has thrown a wrench into the convergence story.
As we see signs of disinflation and that the anti-inflation medicine is working, attention will shift to the outlook for slower growth and the risk of recession next year. We look at what that environment means for emerging market fixed income.
Some sovereign debt restructurings seem to be taking a very long time. This has led to concerns that the Common Framework – an initiative rolled out by the G20 as a formal framework for debt restructurings for low-income countries – is not working, although restructurings outside the Common Framework are also subject to huge delays. What can be done amid fears of a rising wave of sovereign defaults?
Despite news headlines being dominated by stories of conflict and strife, global military spending, as a percentage of GDP, is close to historically low levels. But more belligerent military activity, notably by China, Russia, Iran and North Korea, is forcing US allies everywhere to respond. We look at the investment opportunities across the globe.
The Russian invasion of Ukraine has not gone anything like to plan from the perspective of President Vladimir Putin, but the list of woes does not necessarily make regime change within Russia more likely.