Does EM debt now look more orthodox than developed markets?

Emerging markets now offer better policy settings and real yields than developed markets. This shift reverses historical roles where developed economies were seen as the stable choice.

Post-2008 reforms in emerging markets brought greater macroeconomic stability. They now handle external shocks better than some developed nations facing inflation and deficits. The dollar's declining purchasing power also favors local-currency emerging market debt.

This divergence supports emerging market debt's diversification role. Its lower correlation with developed markets provides access to different return drivers. This is valuable in a market dominated by a few tech giants.