The current inflationary shock is a global phenomenon, driven by supply chain disruptions and the Russia-Ukraine war’s impact on food and commodity prices, with consequences for nations worldwide. The response of policymakers has varied from country to country, contributing to elevated differentials between real – or inflation-adjusted – interest rates in developed markets (DM) and emerging markets (EM). We think this could offer investors opportunities for uncorrelated returns in the form of EM local debt. And yet, investors must be discerning. EM inflationary momentum remains strong, with outcomes highly correlated ... (full story)