As it was the case in the first half of the year, emerging markets delivered strong returns during the third quarter of 2017, reflecting the effects of the sweet spot of low inflation and synchronized economic recovery globally, which makes the ongoing global monetary policy tightening cycle less
threatening for riskier carry trades.

The performance of emerging markets in the fourth quarter of 2017 will depend far more on a benign external environment detached of policy shocks and volatility. It is only in such a benign environment that carry trades are likely to continue their performance trend seen so far this year.

Our baseline scenario is one of more subdued returns in an environment characterized by increasing volatility and relatively more crowded positions.