Emerging Markets Market Review and Outlook

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Emerging Markets: Market Review and Outlook Q2 2021

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Emerging Markets Portfolio Team
JUN 30, 2021

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Market Review:

During the second quarter, rate volatility and several idiosyncratic stories drove market performance within Emerging Markets (EM). After the 10-year treasury yield ended the first quarter at the highest level since January 2020, yields rallied back to 1.47%, largely driven by the view that inflation will be more transitory than initially projected.

The strong economic recovery in China and the United States thus far in 2021 has boosted market optimism; however, recovery in EM has lagged. Delays to vaccine rollouts and persistently high new cases and deaths have hindered re-opening plans and put excess pressure on economies. The emergence of the coronavirus delta variant is another impediment to a quick EM recovery.

Commodities had a strong quarter across the board. Brent hit levels not seen since October 2018, while metals including Iron Ore and Zinc, along with agriculture and pulp, marched higher. The strong commodity trend is supportive for most EM countries as an offset to their weak domestic economies.