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EM Debt: To Hold, or Not to Hold?

Exploring the Debt of Emerging Countries and Companies

Nicolas Rabener
10 min read
16 Mar 2020

SUMMARY

  • Hard currency emerging market debt outperformed local currency EM debt since 2013
  • EM government and corporate debt traded comparably
  • Adding EM debt to a traditional US equity-bond portfolio would have generated only marginal benefits

INTRODUCTION

Forecasting the short-term outlook for the S&P 500 is like predicting the weather in Scotland. The likelihood of getting it right is not particularly high and anything can be expected. However, evaluating the long-term prospects of a stock market seems to be a function of its valuation. It is not a perfect relationship, but the higher the multiple on average, the lower the subsequent return over a 10-year time horizon.

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