Policy

Improved consumer morale will not compensate for the fading tailwinds to consumption. Neither will the wealth effects from higher stocks and home prices.

We assess where emerging markets debt is on a strategic and cyclical basis. We find it has benefited from local central banks boosting their inflation-fighting credentials and governments improving financial stability. As a result, EM debt is behaving less like a risk-on asset, changing the role it plays in a global portfolio. We also expand our asset allocation playbook by assessing how the asset class behaves across the business cycle. While EM debt is more than a risk-on play, we suggest investors stay cautious on a cyclical horizon.

In this <i>Insight</i>, we revisit our long AUD trades, after the upgrade from our attractiveness ranking last week.