Top of the Morning: Resilience tested - Emerging markets navigate the energy shock
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Emerging market bonds have held up well despite ongoing geopolitical tensions, while equities have been more exposed. We discuss the factors that are driving this divergence, and how investors should consider positioning in emerging markets given the current risks and opportuniti
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4 itemsTop of the Morning: Resilience tested - Emerging markets navigate the energy shock
The desk underscores the resilience of emerging market bonds amid escalating geopolitical tensions and an energy crisis, diverging sharply from the vulnerabilities observed in emerging market equities. Per the full note from UBS, historical data suggests that investors who remain steadfast during geopolitical shocks often reap rewards, indicating a potential for stability in this sector despite current challenges. The desk notes that the S&P 500 has historically provided positive median returns following such shocks, highlighting a broader context of recovery opportunities. Consequently, the desk may suggest a careful reevaluation of positions within emerging markets, especially as investors navigate the risks and opportunities presented by the ongoing energy crisis and geopolitical landscapes.