EM backdrop supportive, but no clear inflection point

Emerging markets have gained from a clear improvement in sentiment, driven by hopes for a US-Iran peace deal and lower oil prices. This has eased pressure on current accounts, inflation, and central banks in many oil-importing countries, while helping high-yield and frontier debt as spreads tighten.

Even so, the real economy will likely lag the market reaction. Trade flows, shipping patterns, inventories and energy infrastructure need time to normalize, so inflation may stay sticky for several months before easing more clearly.

That means investors should not assume the rally is finished or fully justified by fundamentals. Local rates and currencies still offer attractive carry in many markets, but returns are likely to depend more on country selection than broad exposure.

Overall, the outlook remains constructive but selective. Investors may want to favor stronger policy frameworks and balance sheets while staying alert to inflation delays and geopolitical setbacks.