TCW Targets Emerging Markets as Low-Rate Era Ends
TCW investment managers are shifting focus toward resilient emerging markets and fixed income as global interest rates return to historical norms.
Investment managers at TCW are identifying new opportunities in fixed income and emerging markets as the global economy moves away from a prolonged period of low interest rates. The firm asserts that the era of low rates was an anomaly and that current higher levels represent a return to normal market conditions.
TCW is utilizing a bottom-up, country-by-country analysis to find inflection points, noting a significant dispersion between winning and losing markets. Brazil is highlighted as a top performer due to its high real rates and strengthening currency. Additionally, the firm identifies frontier markets such as Nigeria and Egypt as attractive options because they show less correlation to global macroeconomic trends.
While developed markets continue to face fiscal challenges, TCW notes that emerging markets have increased their resilience through fiscal consolidation. Despite high yields in the United States and a strong dollar, the firm suggests the U.S. Dollar Index may be at the high end of its range, which could create further upside for emerging market assets.
