I am Ihab Salib, Senior Portfolio Manager and Head of International Fixed Income at Federated Investors.
If a global recession were to materialize, how would emerging markets fare?
Well, depending how severe of a recession we have, and we don't think we will have a severe recession, that can actually be pretty good for emerging markets. So emerging markets can fare pretty well. A mild recession will lead to lower rates in the U.S. and globally as central banks begin to shift their monetary policy. And those lower rates historically have been very supportive to emerging markets, sovereign bonds, as well as corporate bonds. Emerging markets also can look very attractive on a valuation basis. So as yields decline around the globe, emerging markets still offer some of the highest yields you can have within the investment grade universe as well as the high yield universe.
Views are as of August 29, 2019 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices. International investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards. Prices of emerging-market and frontier-market securities can be significantly more volatile than the prices of securities in developed countries, and currency risk and political risks are accentuated in emerging markets. Federated Investment Management Company 19-10120 (9/19)