Emerging markets debt has had a strong and almost uninterrupted rally this year, bringing gains for dollar-denominated bonds to 9% through the end of August and 15% for local currency debt. Now, as we enter a new period of monetary policy in developed markets characterized by the withdrawal of liquidity by central banks, investors are questioning if EM debt will maintain its momentum.
In the recent market rally that has been characterized by a risk-on sentiment across most asset classes, investors have gravitated to high yield and leveraged bank loans or income strategies with a heavy allocation to these extended sectors of the market. As we approach the late stages of this market rally, we think it is appropriate for investors to take a fresh look at their credit exposure.
Brick-and-mortar retail stores are under pressure like never before. Although the trend began two decades ago, internet commerce has changed the retail landscape in a profound way and at unprecedented speed. Retailers have navigated a history of cyclical pressures ranging from soft economies, swings in real estate valuations, supply chain disruptions and evolving consumer behavior. However, the current environment is different, creating structural fissures that have shuttered many stores and forced them to rethink their business models.
Illinois dominated municipal bond market headlines early this summer, as the state faced a potential downgrade to speculative grade by all three rating agencies amid fiscal woes. Nevertheless, our muni team saw the potential for a political solution despite the noise, and opportunistically invested in the state’s general obligation bonds (GO) in several of our municipal bond funds where they were appropriate holdings.