Investment Monthly
EM Still Rallying
10 November 2025
Key Takeaways:
- As we head into 2026, we expect global market leadership to continue to broaden out as US GDP and profits growth converges with other countries
- Bouts of volatility remain likely in a backdrop of supply side constraints, policy uncertainty, and a US stock market that is concentrated in tech names
- A number of structural and cyclical tailwinds favour EM assets, including the prospect of a multi-year decline in the US dollar, strong growth rates, and increasing economic resiliency
- In a world of significant upside inflation risk, multi-asset investors should look for bond substitutes. This can include liquid alternatives such as gold, real assets, and private markets
Macro Outlook
- Tariffs and policy uncertainty are weighing on US activity, but there is some offset from AI-related capex spending. Jobs growth is likely to be weak in the coming months amid a clampdown on immigration
- We expect US growth to moderate to 1.5 per cent, catching down to other major developed economies. Tariffs pose upside risks to inflation
- In China, we expect resilient but uneven growth with tariff headwinds offset by continuing policy support to rebalance and reflate the economy
- We think premium growth opportunities lie in emerging and frontier markets, with economic power shifting to Asia and the Global South
Policy Outlook
- After September’s rate cut, further easing is likely to be gradual as the US Fed seeks to balance above-target inflation with labour market risks
- After eight rate cuts, eurozone inflation is close to target and policy is in neutral territory, with the ECB taking a “wait-and-watch” stance
- Benign inflation leave EM Asia central banks with scope to ease policy further, alongside fiscal and industrial supports to offset trade headwinds
- Supportive macro policy in China is focused on structural rebalancing – mainly via supply-side reforms to restore corporate profits, and boosting consumption on the demand side