Understand emerging markets opportunities and the American Century advantage.
By Joyce Huang, CFA - June 2020
Risk assets continued to gain ground in May amid slowing coronavirus infection rates and the reopening of many U.S. states and European countries. Additionally, massive amounts of global monetary and fiscal stimulus supported the financial markets. Despite this renewed optimism, we believe risk potential remains elevated, underscoring the importance of active investing.
Economy. Recent GDP data confirmed the severity of the COVID-19-related economic slowdown. In the U.S. and eurozone, annualized GDP contracted 5% and 3.1%, respectively, in the first quarter. However, there were some glimmers of improvement in May. The U.S. unemployment rate dropped to 13.3% from 14.7% in April, and U.S. consumer confidence rose after a steep drop in April.
Rates. The global recession and central bank stimulus likely will keep key lending rates and government bond yields unusually low across developed markets for the foreseeable future.
Inflation. While inflation likely will remain unusually low in the short term, we believe inflationary pressures are building. In our view, massive U.S. debt, a weaker U.S. dollar and onshoring trends will push inflation higher in the intermediate term.
Notes from the Global Fixed Income Desk
Previously, EM policymakers sought to protect their currencies when capital flows suddenly stopped. Now, they are trying to protect growth—at any cost.
Finding value and managing risk in emerging markets debt often means seeking opportunities beyond the constraints of a broad market benchmark.
Monthly analysis of the global bond market.
As the credit cycle ages and corporate bond investors grow increasingly defensive, we believe select strategies may continue to deliver value.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.