Interview, Conference Presentation
No longer overbought, still advantaged; Emerging Markets
- Emerging markets are viewed as possessing significant resource quantities driven by politically motivated demand, with the Iran conflict currently treated as a temporary disruption rather than a change in the secular outlook.
- April is identified as a critical timeframe where global energy market shortages will intensify, potentially causing Iran-related headlines to have a progressively larger impact on energy prices.
- If the Iran conflict persists beyond one month, the outlook includes an increasingly likely scenario of higher global inflation, lower global growth, a stronger dollar, and negative consequences for energy-importing emerging markets.
- A window of approximately one month remains for investors to maintain current structural views; however, if tensions ease gradually, a return to a bullish baseline is expected, benefiting energy importers in Asia and Eastern Europe, specifically India, South Africa, and Turkey.
- China's currency is projected to strengthen relative to European partners and other Asian currencies across both tense and easing geopolitical scenarios.
- In the absence of a major global story change, the U.S. dollar downtrend is expected to continue, favoring capital inflows into emerging markets.
- AI implications are anticipated to be favorable for emerging markets due to increased investment requirements in resources and energy.
- Global trade developments for the next year are expected to be shaped by elections in Brazil, Colombia, and Hungary, alongside a rescheduled Trump-She meeting.
- Latin America is projected to outperform in both constructive and downside scenarios, driven by commodity valuations and energy self-sufficiency.
- Despite potential resolution of the Iran conflict, energy prices are expected to remain structurally higher due to ongoing shifts.
- The Brazilian Central Bank is expected to continue cutting rates in the short term, though long-term conviction regarding oil price impacts is absent.
- Brazilian inflation is forecast to rise due to the current oil price shock, which could influence the odds of President Lula's reelection.
- Executive positions in Brazil carry a deadline in early April for those seeking other executive roles, which may result in governors leaving current posts.
- Election-related debates in Brazil are expected to intensify as the timeline approaches July and August, with a mid-August deadline to finalize candidates.
- Elections in Colombia and Peru are scheduled for the first half of the year, with discussions potentially focusing on shifting policy mixes toward more liberal, market-friendly approaches.
- The base case for Brazil includes further rate cuts that will benefit specific sectors within the country.
- In Argentina, equity prices are expected to rise if the government approves additional reforms and secures a Congressional majority.
- The process to include Argentina back in MSCI indices is expected to take more than one year following the relaxation of capital controls.