All-weather resilience - 2026 emerging markets outlook

Insight

December 17, 2025

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Key Takeaways


EM enters 2026 with a calmer external backdrop

  • Easing geopolitical tensions, reduced tariff uncertainty and firmer US-China cooperation lower macro headwinds.

EM growth remains resilient and broadly near trend

  • Supported by global capex momentum, a rebound in non-tech exports and improving labour-market conditions across several regions.

Regional divergence persists

  • India in a Goldilocks phase, Eastern Europe benefiting from stronger investment and fading geopolitical risk premia, China continuing a more challenging economic rebalancing and political shifts in Latin America.

EM balance sheets are fundamentally solid

  • Stable sovereign metrics, resilient corporate leverage and record upgrade activity, while default risks remain contained and idiosyncratic.

Flows and valuations remain supportive

  • Renewed inflows into EM credit, shrinking net supply, attractive spreads relative to leverage and yields that offer above-trend total-return potential.

Overall, EM stands well-positioned for 2026

  • A steadier global environment, healthy fundamentals and attractive valuations create a compelling case for maintaining - and in many cases increasing - exposure.

 

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This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co are as of December 2025 and may change without notice.

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