Global Reboot: The Changing Structure of the Global Economy

In their Nov. 8, 2022, international fixed income webcast, portfolio managers Bill Campbell and Mark Christensen discuss structural changes reshaping the global economy for the long term as well as intermediate-term cyclical developments, and the outlook for emerging markets. Mr. Campbell cites three major structural themes that are transforming the global economy: the end of China as an underwriter of global growth (0:51), the protracted Russia-Ukraine conflict (10:39) and global inflation (16:14). Mr. Campbell then turns to cyclical factors (25:57) now at work on the global economy, including the draining of liquidity by the world’s central banks as a drag on global growth.

Mr. Christensen begins his review of emerging fixed income markets (30:16) with a focus on inflation and rising Treasury yields, China’s damaged property sector, political risks, the COVID-19 pandemic, the war in Ukraine and the global growth slowdown. On economic fundamentals, Mr. Christensen expects growth (34:49) to tick up in 2023 in EM Asia, EM Europe and sub-Saharan African and to decline in Latin America and the Middle East. He foresees higher levels of sovereign debt (36:47) in EM Asia and the Middle East and lower levels of sovereign debt in EM Europe, Latin America, the Middle East and sub-Saharan Africa. With respect to EM corporate credit (37:28), he expects net leverage and interest-coverage ratios to weaken slightly, albeit from their strongest levels in many years. He also observes that by those metrics, EM corporate bonds, both high grade and high yield, compare favorably with their U.S. and European peers.


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