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Illustration: Sarah Grillo/Axios

The expected gridlock in Washington and more monetary easing across the globe combined with a less antagonistic approach to countries like Mexico and China from President-elect Biden is getting asset managers excited about emerging markets again.

State of play: Fund managers at JPMorgan Asset Management say EM assets are in a “sweet spot” in the months ahead, especially bonds denominated in local currency.

  • “With the dollar depreciating in the coming quarters, EM local is one of our top trades,” Diana Amoa, who specializes in EM debt, told Bloomberg.
  • Limited fiscal spending suggests interest rates will remain lower for longer and an extended period of dollar weakness will boost bond prices and lure more investors as the desperate hunt for yield continues, she added.

Analysts are also bullish on equities.

  • "Emerging market (EM) assets should perform on improved trade sentiment, we believe, especially in Asia ex-Japan," strategists at the BlackRock Investment Institute said in a note to clients.
  • "Many Asian countries have contained the virus and are ahead in the economic restart."

Yes, but: Both JPMorgan and BlackRock strategists agree that the development of the virus and possible vaccine distribution will be deciding factors for the trade.

Go deeper

Dion Rabouin, author of Markets
Jan 12, 2021 - Economy & Business

For all the fuss, the dollar rally has been underwhelming so far

Data: FactSet; Chart: Axios Visuals

The dollar index rose for the fourth straight session on Monday, worrying investors that the recent rally that has sent the dollar lower as stocks have risen higher could be coming undone.

What they're saying: "The appreciation of the dollar is coming at a time of not only rising yields but a risk-off period created by heightened uncertainty about political developments in the U.S.," Paresh Upadhyaya, director of currency strategy and portfolio manager for Amundi Pioneer Asset Management, told Reuters.

Pelosi calls raising the debt ceiling a bipartisan responsibility

Photo: Samuel Corum/Bloomberg via Getty Images

House Speaker Nancy Pelosi (D-Calif.) issued a "dear colleague" statement Sunday evening, calling on Congress to act in a bipartisan manner to raise the nation's debt ceiling.

Why it matters: Congress is fast approaching an October deadline to raise the nation's debt ceiling and avoid a government shutdown. But the issue has become a thorny partisan stand-off.

3 hours ago - Politics & Policy

Beto not even best Dem against Abbott

Beto O'Rourke speaks at a rally at the Texas State Capitol in June. Photo: Sergio Flores/Getty Images

Actor Matthew McConaughey’s nine-point lead in a theoretical matchup against Greg Abbott shows just how vulnerable the hard-right Texas governor could be in a general election.

Why it matters: Abbott has won conservative accolades for his abortion, mask and vaccine bans. Axios reported Sunday that former Rep. Beto O’Rourke is preparing to announce a gubernatorial challenge — but a recent poll shows he’s not even the most popular Democrat in the state.