Emerging market (EM) assets look set to cap a banner year, with investors expecting inflows into equities and bonds to gain momentum in the final quarter.
Sentiment has rarely been this buoyant, with an HSBC Holdings survey showing EM fund managers as the most bullish since the start of 2021 — when an everything rally was in full swing during the pandemic. Goldman Sachs Group strategists said EM markets are "thriving, not just surviving,” as economic growth this year surpassed expectations despite higher tariffs.
In a likely prelude to what may come, inflows into EM exchange-traded funds began to pick up toward the end of the third quarter. EM assets are facing a positive mix of factors that bode well for the months ahead: the Federal Reserve’s rate-cut cycle is creating space for central banks in developing nations to ease policy, while a softer dollar is encouraging a rotation away from U.S. assets. China’s stock rally could bolster sentiment toward the broader EM universe.
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