Economic Strength, Monetary Policy, and Disinflation: Three Arguments in Favor of Emerging Markets

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Mercados emergentes y fortalezas económicas

The new Donald Trump administration brings uncertainty to emerging markets. However, investment firms believe it is essential to look beyond this and remember that these regions have stronger markets and that the Federal Reserve‘s monetary policy continues to favor risk assets.

According to Kirstie Spence, portfolio manager at Capital Group, many of the major emerging markets can leverage various tools: higher reserve volumes, positive real interest rates with room to decline, fewer imbalances than developed markets, and exchange rates that are fairly valued or undervalued.

“They have policy flexibility to weather the storm if needed. Except for the less consolidated economies, external balances are solid. Additionally, inflation is trending downward in a restrictive monetary policy environment. Fiscal indicators are often a weak point for these markets, but most major emerging markets have extended their debt maturity profile and are now issuing more in local currency,” argues Spence.

She also notes that a Federal Reserve less inclined to cut rates could put pressure on central banks in less developed emerging economies, making it difficult for them to maintain higher interest rates, especially in countries concerned about inflation and financial stability risks. “In more developed emerging markets, particularly in the Asian region, central banks have shown greater confidence in getting ahead of the Federal Reserve, given the absence of systemic pressures on financial systems and the development of deeper, more liquid domestic markets,” she adds.

According to Claudia Calich, Global Head of Emerging Debt at M&G, it is interesting to analyze that the disinflation story in emerging markets is practically complete, with few exceptions in high-inflation countries such as Argentina, Turkey, Egypt, and Nigeria. “It is remarkable how poorly Latin America performed in 2024, affected by both currency depreciation and rising yields. There is much less room for rate cuts, given the expected inflation path in most inflation-targeting economies. However, there is potential for a yield rebound if country-specific concerns ease, such as improved fiscal prospects in Brazil or greater clarity on trade between the U.S. and Mexico, and if currencies stabilize or recover some of the depreciation seen in 2024,” says Calich.

Implications for Investors

Given this backdrop, asset managers are looking for investment opportunities in emerging markets, with debt being one of the most analyzed areas. According to M&G’s expert, local currency bonds in emerging markets remain underappreciated, which could be a good signal for contrarian investors willing to step in and endure some volatility. “However, high short-term interest rates in key markets like the U.S., U.K., and, to a lesser extent, the Eurozone, remain a hurdle for this asset class, and global macroeconomic uncertainty doesn’t help. Local currency bonds in emerging markets still face strong competition from high short-term rates in the U.S., U.K., and Eurozone. This could improve in the future as central banks continue easing, but the risk of ‘higher for longer’ rates remains, especially if U.S. inflation expectations deteriorate due to tariffs,” she explains.

Additionally, M&G acknowledges that they remain selectively constructive on emerging market currencies, as their valuations have become even more attractive after last year’s sell-off. “However, timing the right moment to act is complex, as the fate of the U.S. dollar will largely depend on the policy mix adopted by the new administration,” Calich notes.

The Heavyweights

When discussing investment opportunities, Chris Thomsen, portfolio manager at Capital Group, highlights two “heavyweights”: India and China. In his view, both emerging markets have followed very different trajectories over the past five years, with Indian equities significantly outperforming Chinese equities.

“Valuations reflect these differences. While both markets offer attractive opportunities, they come with their own risks and investment drivers. The increasing penetration of mobile phones among India’s young and vast population has benefited telecom companies like Bharti Airtel, but the high valuation levels make selectivity crucial,” explains Thomsen.

On the other hand, he points out that China’s massive domestic consumer market could be boosted by government stimulus measures, creating opportunities for well-positioned digital companies. “Some companies like Tencent and NetEase hold dominant positions, have strong cash flows, and high-quality management teams. However, investing in China remains risky due to ongoing tensions with the U.S. and the trade priorities of the new Trump administration,” says the Capital Group manager, adding that the reconfiguration of global supply chains presents opportunities in Brazil, Mexico, and Indonesia.

The Industry Will Increase Its allocation to Venture Capital, Private Multi-Asset Solutions and Infrastructure

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Inversión en capital de riesgo y activos privados
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The increasing allocation to private markets in response to market evolution by wealth managers and financial advisors is a clear trend in the industry. In fact, according to the Global Investor Insights Survey (GIIS) by Schroders, more than half of these professionals are currently investing in private markets, with an additional 20% expecting to do so within the next two years.

The survey, which includes 1,755 wealth managers and financial advisors globally—representing $12.1 trillion in assets—reveals that private equity (53%), private multi-asset solutions (47%), and renewable infrastructure equity (46%) are the top three private market asset classes where advisors and wealth managers expect their clients to increase allocations in the next 1-2 years.

Regarding how they expect client allocations to private market asset classes to change over the next 1-2 years, two-thirds of wealth managers and financial advisors highlight the potential for higher returns compared to public markets as the primary benefit of private market investing for their clients. This was closely followed by the ability to achieve diversification through different return drivers (62%). Additionally, on average, most investor allocations to private markets represent between 5%-10% or 1%-5% of their total portfolio exposure.

 

According to Carla Bergareche, Global Head of Wealth Management at Schroders’ Client Group, while many wealth managers and financial advisors are already investing in private markets on behalf of their clients, allocation sizes remain significantly lower than the 20% or more seen in family office and institutional investor portfolios.

“This gap represents a significant opportunity to strengthen client engagement with private markets. We therefore expect these markets to play an increasingly important role in wealth investment portfolios as investors become more aware of the potential for strong and diversified returns,” explains Bergareche.

Access to Private Market Investments

Another key finding is that just over half of surveyed wealth managers and advisors indicated that they access private market opportunities through exchange-traded funds, closely followed by semi-liquid or open-ended indefinite-duration funds (51%). Despite these opportunities, lack of liquidity is cited as the main challenge when discussing private markets with clients.

According to Schroders, 49% of respondents stated that greater financial education for clients would help drive demand, followed by better-suited product structures (42%) and lower investment minimums (42%).

“There is no doubt that private wealth will play a very significant role in private markets in the future. Until now, wealth managers and advisors have had limited options to access these markets compared to their institutional counterparts, which explains why, despite their intent, we still see relatively low allocations,” says Tim Boole, Head of Private Equity Product Management at Schroders Capital.

However, in his experience, the emergence of new vehicles, such as semi-liquid funds, has expanded available access points, representing a significant advancement in providing greater flexibility for investors to achieve their financial goals through private markets. “It’s no surprise that these structures are favored by this client segment,” Boole adds.

Wealth Transfer as a Key Priority

Additionally, the firm highlights that wealth transfer has been identified as a priority for 59% of wealth managers and financial advisors worldwide. In North America, 66% consider it a priority, compared to 57% in the UK, 57% in Asia-Pacific, and 58% in EMEA.

The report shows that wealth transfer discussions are more deeply embedded in the Americas. Specifically, Latin America has the highest level of engagement globally, with 58% of advisors stating they have addressed this topic with more than half of their clients. In EMEA and Asia-Pacific, participation is lower, with 43% and 46% of advisors engaging in these discussions, primarily due to cultural sensitivities.

From the Visible to the Invisible: The Impact of Tariffs on the Market, Assets, and Portfolios

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Impacto de los aranceles en mercados y carteras
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After a few weeks of intense market reactions to Donald Trump’s statements, investors have shown they can tolerate the volatility his words generate. “Throughout the week, the market has focused more on the positives than the negatives. In all cases, it seems that the parties have given themselves time to negotiate—the new Chinese tariffs will take effect on February 10—allowing stock markets to resume their upward trend on Tuesday. Additionally, inflation fears remain under control, which has strengthened fixed-income markets, especially longer-duration bonds,” analysts at Banca March noted.

For Yves Bonzon, CIO of Julius Baer, the U.S. stock market no longer fears potential tariffs, seeing them merely as a negotiation tool for Trump to extract benefits from the involved governments. “We now know that the president views the stock market as one of the best indicators of his policy success. He cannot ignore the consequences of imposing tariffs of this magnitude on U.S.-Mexico-Canada Agreement partners. If we add trade with Mexico and China, which currently faces 10% tariffs, nearly half of U.S. imports are now subject to these new levies,” explains Bonzon.

This perspective aligns with the views of Samy Chaar, Chief Economist and CIO Switzerland at Lombard Odier, and Luca Bindelli, Head of Investment Strategy at the firm: “Trump’s White House is deeply challenging the post-1945 global order, but for now, policy initiatives are mostly aligned with campaign rhetoric. As a result, our baseline expectations for the U.S. economy and markets remain unchanged.”

Experts at EDM also note that despite macroeconomic and political uncertainties, equity investors have remained optimistic, pushing stock prices higher (S&P 500 +4.0%; MSCI World +3.6%). “However, gains are starting to be more diversified than in 2024, which was characterized by a strong concentration in tech-driven returns. Bond markets are seeing rising yields due to higher medium- and long-term inflation expectations, fueled by negative price adjustments. There is no doubt that concerns over the growing U.S. debt are behind this increased demand for higher returns,” EDM stated in its latest report.

Market Outlook

According to MFS IM, global equity markets have not yet fully priced in significant downside risks. The firm argues that, in general, tariffs—if implemented as currently expected—will negatively impact stocks, primarily reflecting concerns about a combination of slower global growth and higher interest rates. “This is evident in price action, or how stock prices reacted immediately after the U.S. announcement,” they explain. However, MFS IM emphasizes that when assessing broader market implications, it is crucial to differentiate between companies based on their export exposure.

Conversely, in fixed-income markets, MFS IM believes the risk of a trade war had already been fully priced into global bond markets. “One of the most pronounced transmission channels has been the currency markets, with the Canadian dollar and Mexican peso suffering sharp losses against the U.S. dollar. Both currencies have since recovered due to negotiations that delayed tariff implementation,” they acknowledge.

Regarding U.S. fixed income, MFS IM believes this latest development will likely further constrain the Federal Reserve’s ability to ease policy in the future, given the potential impact of a one-off price adjustment on domestic inflation. “As a result, initial interest rates are likely to rise, triggering some flattening of the yield curve,” they indicate.

For Connor Fitzgerald and Schuyler Reece, fixed-income portfolio managers at Wellington Management, during times of market uncertainty, investors tend to flock to safe-haven assets, causing demand for U.S. Treasury bonds to surge. “We believe the best time to consider Treasuries is before volatility hits. If fixed-income portfolios already contain U.S. Treasuries when negative market events occur, investors can dynamically rotate their allocations, anticipating the shift from credit to Treasuries, and execute transactions at potentially more attractive levels on both sides of the trade,” they argue.

Chaar adds: “We expect 10-year Treasury yields to settle around 4.5% over the next 12 months, suggesting limited pressure on equity valuations. We maintain our preference for corporate bonds, which should offer higher yields than government bonds for comparable maturities. In fact, U.S. corporate bonds should still benefit from a likely pro-growth agenda in the U.S. (through deregulation and tax cuts) and relatively stable spreads, whereas government bonds may continue to face challenges due to rising budget deficits and refinancing needs, increasing yield volatility.”

Flexible Portfolios

From a portfolio management perspective, the current situation underscores the importance of remaining flexible and maintaining composure in the face of volatility, as such periods are often accompanied by excessive noise and fluctuating headlines. “While we remain attentive to news flows, we do not believe current market movements have created opportunities for significant changes in our asset allocation,” states Felipe Villarroel, portfolio manager at TwentyFour AM (a Vontobel boutique).

Regarding long-term implications, Villarroel believes it is too early to determine how the balance of power will shift under Trump’s administration. “That said, we believe U.S. exceptionalism and its enduring status as a safe-haven asset and recipient of foreign capital are partly due to the predictability of its policies. Today, market sentiment on this has not changed, but there may come a point where investors start feeling uneasy. These characteristics are also factored into credit rating agencies’ assessments and influence the ongoing evaluation of a country’s AAA rating. We doubt rating agencies will react to Trump’s initial salvos; however, if tariffs remained in place, GDP growth assumptions would change, potentially triggering a review,” Villarroel concludes.

GAM Investments Hires a New European Equity Team

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GAM Investments y nuevo equipo de renta variable
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GAM Investments has announced the addition of three professionals from the European equity team at Janus Henderson Investors. According to the asset manager, “these strategic hires reinforce GAM’s commitment to providing clients with access to the highest quality in investment, along with exceptional results.”

The team will be led by Tom O’Hara, alongside Jamie Ross and David Barker, also from Janus Henderson. The three bring extensive experience, having managed over 6.5 billion euros in European equity funds for institutional and retail clients worldwide. According to the firm, these professionals will join GAM in the coming months.

Following the announcement, Tom O’Hara stated: “For decades, GAM has attracted some of the best talent in the industry for the benefit of its clients. Its strong track record in European equities has directly shaped my approach to investing. I take on this new challenge with pride and look forward to contributing to GAM’s sustainable long-term growth.”

Meanwhile, Elmar Zumbuehl, CEO of GAM Group, commented: “We are delighted to welcome Tom, Jamie, and David to GAM. We are confident that their extensive experience and proven investment success will be a valuable asset to our firm. Attracting such outstanding investment professionals highlights GAM’s distinctive and appealing culture, our strategy, and our long-term commitment.”

Trump’s Policy and Central Bank Demand: Bullish Factors for Gold

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Trump, bancos centrales y oro
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After a pause in December, gold reached new all-time highs, outperforming all other asset classes in 2024. This upward trend has continued in 2025, and by the end of January, gold had broken its own records, reaching $2,798.40 per ounce. According to experts, this strong performance is driven by its demand as a safe-haven asset amid geopolitical uncertainties and concerns about the impact of tariffs imposed by Donald Trump’s administration on the global economy.

“Global gold demand was much stronger toward the end of last year than available data suggested. The World Gold Council’s demand trends for the fourth quarter of 2024 showed strong growth in investment demand and central bank purchases, which further reinforced bullish sentiment in the gold market and pushed prices to a new all-time high,” explains Carsten Menke, Head of Next Generation Research at Julius Baer.

According to Ned Naylor-Leyland, investment manager for gold and silver at Jupiter AM, the gold market is currently in a bull phase, but the broader market has not yet fully participated, which suggests there is still room for further gains. He notes that gold mining companies have increased production and profit margins, but their stock prices have not risen at the same pace.

The Impact of Tariffs

According to Menke, global gold trade between the U.S. futures market and European physical markets could be affected by the tariffs Trump has threatened to impose. “This is creating uncertainty among gold traders and widening the price gap between New York and London. In theory, tariffs—if implemented—should not alter the long-term supply and demand balance in the global gold market or international benchmark prices. That said, if market imbalances arise in the short term due to tariffs, prices will need to signal the need to attract sufficient supplies to the U.S.,” he explains.

In this regard, Menke argues that the fundamental impact on global gold demand would be more related to prolonged trade tensions, which could be one of the bullish factors of Trump’s presidency. “Overall, we believe his administration could generate a wide range of possible outcomes, both bullish and bearish. Our outlook on gold remains positive, primarily based on the resumption of central bank purchases rather than Trump’s presidency,” he clarifies.

The Role of Central Banks

Another key factor supporting gold’s rally is that several major central banks, including the European Central Bank, the Bank of Canada, and Sweden’s Riksbank, are implementing interest rate cuts, increasing gold’s appeal. Although the Federal Reserve decided to keep rates unchanged, investors anticipate two additional rate cuts this year, which could also support the metal’s price.

“Countries like China, India, and Turkey have increased their gold reserves to diversify assets at the expense of the U.S. dollar. Globally, central banks purchased 694 tons of gold in the first few months of the year; in November, the People’s Bank of China announced it would resume gold purchases after a six-month pause,” notes Diego Franzin, Head of Portfolio Strategies at Plenisfer Investments, part of Generali Investments.

According to Franzin, monetary policy decisions also play a crucial role in the gold market. “During the phase of rising interest rates, gold was the ultimate hedge against inflation, which monetary policies were fighting. In the current phase of rate cuts, gold continues to offer an alternative to other asset classes, although the cost-benefit ratio of holding gold has increased. Gold prices saw a slight dip after the Fed’s rate cut in December. However, it is worth noting that the U.S. central bank also indicated that next year’s rate cuts would be slower than previously expected,” he states.

Outlook

Considering these factors, some experts, such as Franzin, estimate that gold could reach $3,000 per ounce, supported by the continuation of the aforementioned trends and a potential resurgence of inflation driven by fiscal and trade policies under the new Trump administration. “There are also expectations of another increase in U.S. public debt,” he adds.

“Beyond central bank purchases, gold market demand has been largely driven by sophisticated investors, such as hedge funds and algorithmic traders, who have pushed gold futures higher,” adds the Jupiter AM manager.

At Plenisfer Investments, they believe that regardless of short-term price trends, gold will continue to play several key roles in an investment portfolio in 2025. *”It will remain a strong diversification element, helping to reduce portfolio volatility due to its low correlation with other assets. It will continue to offer protection against inflation, which historically occurs in waves and could persist, particularly in the U.S., above the levels currently expected by markets.

Lastly, it will remain a safe-haven asset in times of economic or geopolitical uncertainty,” concludes Franzin.

Trump’s Tariff Game: Beware of Missteps and Noise

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Aranceles de Trump y su impacto económico
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One of the key recommendations made by international asset managers at the beginning of the year was the need to filter out the noise surrounding Donald Trump‘s approach to policymaking. The trade war launched by his administration, which has put the word “tariff” in most headlines since yesterday, is a clear example of why investment firms gave that advice.

If we look at the latest developments, China has imposed tariffs on U.S. products set to take effect on February 10. Specifically, it has announced a 15% tariff on coal and liquefied gas and a 10% tariff on oil, agricultural machinery, high-displacement cars, and pickup trucks. Canada’s response was similar, with Prime Minister Justin Trudeau announcing 25% tariffs on U.S. products. Meanwhile, after a “friendly” phone call with Claudia Sheinbaum, president of Mexico, Trump has decided to pause the 25% tariffs on the country for a month in exchange for a series of commitments on border and trade security.

Time to Negotiate?

According to experts, this first move in the trade war by all parties confirms what many had anticipated: tariffs will be used as a bargaining tool. “As we predicted, Trump is starting his term by using trade policy decisions as a shock weapon within a broader framework of future negotiations, allowing him to partially rebalance trade with some economies. We already saw this tactic during the NAFTA renegotiation when Trump’s threats to withdraw from the trade alliance successfully pressured for a new agreement,” state analysts at Banca March.

Experts at the firm believe that China, having already experienced a trade war, is less inclined to give in to such pressure. Trump is now expected to speak with Chinese President Xi Jinping in the coming days, raising hopes that both leaders may reach an agreement to avoid a new trade war.

For Damian McIntyre, Head of Multi-Asset Solutions at Federated Hermes, these announcements signal to the world that Trump is willing and able to use tariffs as a tool. “While this could ultimately be a negotiation tactic, it has the potential to reshape global investment narratives, including the need for higher risk premiums for countries he perceives as unfair players. Whether it’s tariffs and geopolitical tensions or AI and profits, investors face many risks in today’s market. We believe that investing in a globally diversified range of assets is one way for investors to maintain strong and resilient portfolios,” says McIntyre.

In this context, asset managers are focusing on the imbalances in public accounts and their impact on national economies. “Contrary to what Trump’s rhetoric suggests, it is not the exporting countries that pay the tariffs. U.S. importing companies pay these tariffs to the Treasury. Mechanically, the first impact will be on U.S. companies. For the end consumer, an increase in customs duties has a macroeconomic effect similar to that of a tax hike. It has a temporary impact on inflation and a downward effect on demand, which tends to push prices lower. The main risk, therefore, is a demand-driven growth shock rather than an inflation shock,” explains Enguerrand Artaz, analyst at La Financière de l’Échiquier.

“Trump knows that an open trade war would mean higher inflation for the average U.S. citizen, something he will likely want to avoid in the end. Meanwhile, we must get used to a more volatile 2025 than the previous year, where risk assets, particularly fixed income, will continue to offer attractive entry opportunities,” say analysts at Banca March.

Market Reactions

The first two days following these announcements have also provided insight into how markets are digesting the possibility of a new trade war. According to Robeco, the swift execution of Trump’s tariff threats surprised markets, causing volatility in equities, while safe-haven assets like gold and the dollar surged. “After Trump abruptly withdrew his threat of general tariffs on Colombia earlier last week following a migrant deportation deal, the market was convinced that Trump’s bite would be softer than his bark,” says Peter van der Welle, Strategist for Sustainable Multi-Asset Solutions at Robeco.

Van der Welle believes that the latest tariff announcements on Canada and Mexico show that Trump’s bite is primarily tied to his willingness to seal a border security deal and achieve his political goal of restricting migration. “With markets now forced to guess Trump’s next trade policy moves, U.S. trade policy uncertainty has reached its highest level in 40 years, except for the summer of 2019, when the U.S.-China trade war was at its peak. We expect market volatility to remain high in the short term, reflecting a significant risk of another major trade announcement targeting China, Europe, and/or Japan,” he notes.

Key Takeaways for Investors

Michael Medeiros, macroeconomic strategist at Wellington Management, believes that the most important factor for investors to consider in this situation is the increased likelihood of higher inflation volatility, a lower probability of supply-side improvements in the economy, and the significant link between tariff revenues and tax cuts through budget reconciliation. “These tariffs represent Trump delivering on his campaign promises. He is doing what he said he would do, and that is another key factor to keep in mind,” says Medeiros.

Economists at BofA agree that using tariffs as a bargaining tool has increased trade policy uncertainty and expect this trend to continue. “For markets, we see three key takeaways: the U.S. administration is transactional—nothing is final until it’s signed; U.S. economic policy threats should be taken seriously and literally; and the U.S. ‘bailout’ policy may be further from financial relief than the market expects. Investors have suggested that the stock market serves as the U.S. administration’s performance marker and that any policy shift affecting risk assets will be quickly reversed. We advise caution,” they state in their latest report.

MFS IM Presents Its Vision on Fixed Income in “The Year of the Great Bifurcation”

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MFS IM y renta fija

The fixed income market has started 2025 with intensity.

For this reason, MFS IM wants to share the vision of Pilar Gómez-Bravo, MFS Co-CIO of Fixed Income, on the opportunities in this asset class through a new webcast. Additionally, the expert will also discuss her perspective on how fixed income environments differ between the U.S. and Europe, why duration exposure varies across regions, and where they see investment opportunities on a global scale.

The online event will take place next Wednesday, February 26, at 9:30 AM (EST), 2:30 PM (GMT), and 3:30 PM (CET). If you cannot attend live, a replay link will be sent to registered participants.

If you would like to attend, you can register through this link. You may also submit your questions in advance via email: webcasts@mfs.com

Argentina 2025: Recovery and growth driven by economic stability

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Argentina y crecimiento económico
Pilar Tavella, Head of Macro Research & Strategy at Balanz

In the dynamic world of asset management, Pilar Tavella, Head of Macro Research & Strategy at Balanz, has built a solid career based on her passion for economics and markets. In this exclusive conversation for the Key Trends Watch initiative by FlexFunds and Funds Society, Pilar shares her vision on the current challenges, growth opportunities, and the impact of economic programs on the evolution of the Argentine market.

Regarding the biggest challenges, Tavella points out that one of the main aspects of her role is translating complex macroeconomic analysis into clear investment strategies. “The key is to stay ahead of the market, evaluate what might perform better or worse than expected, and anticipate how markets will react to these dynamics.” According to her, this becomes especially relevant in a highly volatile environment where macroeconomic conditions are constantly shifting.

As for the development of Argentina’s financial market, she stresses that macroeconomic stability is fundamental. “If the decline in inflation is sustained, we will see the emergence of a more sophisticated and diversified market. This will allow investors to consider medium-term strategies beyond dollarization or hedging against shocks.” In her view, consolidating stability is essential for this growth.

Performance of the Argentine government’s economic program

Tavella acknowledges significant progress in the Argentine government’s economic program, highlighting the faster-than-expected fiscal consolidation and inflation containment. “The government has managed to avoid an inflationary spiral through fiscal discipline and monetary prudence, along with popular support that has been crucial in this process.” However, she notes that the sustainability of these policies will depend on maintaining political commitment and long-term credibility.

The main anchors of the economic program are fiscal and political stability. The combination of these two factors, along with tangible results, has allowed the government to build credibility—an additional stabilizing factor.

A sustained fiscal surplus is particularly noteworthy, as Argentina has struggled to achieve this consistently in the past. This progress, combined with an administration that maintains political stability despite implementing adjustments, is an uncommon scenario. Historically, such coherence was only achieved after deep crises, such as in 2001, but this time, it is occurring with a  moderate recession of approximately -2.5%, she explains.

“The fiscal surplus acts as an anchor because it creates expectations of continuity. It wouldn’t be effective if perceived as temporary. The government’s commitment, demonstrated through actions like vetoing laws and accelerating fiscal consolidation, reinforces this perception of stability. In essence, the combination of a sustained fiscal surplus, political stability, and growing credibility underpins this program and gives it strength,” she adds.

Regarding negative effects, she acknowledges that recession is one of the inevitable consequences, “although it has been shallower and shorter than anticipated.” However, the biggest challenge  lies in the sustainability of the real exchange rate. While exchange rate appreciation reflects macroeconomic improvement, excessive appreciation could put pressure on the balance of payments.

Growth and inflation scenarios for 2025

Pilar Tavella is optimistic about the near future, forecasting a shallower recession than expected in 2024 and a cyclical growth of 5% in 2025. “The recovery is happening faster than expected, thanks to factors such as fiscal consolidation, real income recovery, and credit growth.”

Regarding inflation, she projects a significant decline, with annual levels between 25% and 30%, always considering that external shocks remain a risk in Argentina. The main challenge for  Argentina’s economic program is to consolidate stability and move towards a more flexible and sustainable exchange rate and monetary framework. This requires reducing sovereign risk to facilitate corporate financing and allowing a gradual easing of foreign exchange controls.

Argentina needs to accumulate net reserves, which are still negative, and avoid excessive exchange rate appreciation, she emphasizes. Transitioning to a more flexible model would improve reserve prospects and make inflation reduction more sustainable. A first step would be to normalize the current account by adjusting the export framework so that more foreign currency flows into the official market.

She adds that current conditions—low monetary issuance, reduced inflation, and peso constraints—allow for a gradual liberalization of foreign exchange, prioritizing capital flows over stock adjustments. While the political context may have an impact, concrete steps toward a more flexible and sustainable framework are expected in 2025.

Asset rally

The recent rally in Argentine assets has been primarily led by local investors, particularly in bonds and equities. This contrasts with previous periods when foreign investors played a larger role, though their current lower exposure may be due to past negative experiences in the Argentine market. The challenge now is to attract external capital again to expand the recovery.

For 2025, the expert highlights Argentine sovereign bonds as a key bet. Despite their positive performance, they still have room for appreciation, especially if the country progresses toward regaining market access. In equities, following an exceptionally strong performance, she suggests a more selective approach, prioritizing sectors with higher growth potential.

“To attract greater interest from foreign investors, it is crucial to improve the outlook for international reserve accumulation. While there is confidence in the government’s ability to meet short-term debt payments, challenges will increase in the medium and long term when maturities accumulate,” she states.

She concludes that a solid agreement with the International Monetary Fund (IMF) and a gradual easing of the exchange rate framework would be key steps. These measures would help build confidence in the sustainability of the balance of payments and Argentina’s ability to accumulate sufficient reserves in the future.

Interview conducted by Emilio Veiga Gil, Executive Vice President at FlexFunds, as part of the Key Trends Watch initiative by FlexFunds and Funds Society.

World Leaders Call for Action on AI and Regional Reforms

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Photo courtesy

The 2025 Annual Meeting of the World Economic Forum took place this week, with world leaders emphasizing regional reforms and the application of artificial intelligence. The event was not immune to the words and actions of Donald Trump. In fact, several sessions included discussions and reflections on the potential economic effects of the new U.S. administration.

For example, during Tuesday’s session, European Commission President Ursula von der Leyen responded to growing threats of tariff policies and anti-climate measures from the U.S. president. According to Banca March analysts, Von der Leyen reaffirmed the European Union’s commitment to remaining an open bloc willing to cooperate with international partners, advocating for an open approach in contrast to U.S. protectionism.

“She described the bloc’s strategy, which will be based on negotiation, while also stressing the importance of defending the EU’s principles, interests, and values,” they noted.

Banca March also highlighted that several international financial executives spoke during the sessions, pointing out a competitive advantage for U.S. banks due to their more lenient regulations. The CEO of Italian bank UniCredit stated that American banks are the real competitors. JP Morgan noted that Trump has created a very pro-business environment. The Vice President of BlackRock argued that Europe needs a wake-up call on regulation. In contrast, the CEO of UBS took the opposite stance, opposing widespread deregulation for large banks.

Regarding other industries, the CEO of pharmaceutical company Novartis downplayed concerns about Trump’s stance on vaccines and other health policies, calling such worries “exaggerated.”

Environmental Commitments

One of the most significant announcements was the creation of the world’s largest tropical forest reserve, the Kivu-to-Kinshasa Green Corridor Reserve, which will protect over 550,000 square kilometers of forest across the Congo River Basin.

“This historic and unprecedented initiative will not only transform our natural landscapes but also improve the livelihoods of millions of our citizens,” said Democratic Republic of Congo (DRC) President Félix-Antoine Tshisekedi Tshilombo. He added that the project goes beyond environmental preservation, incorporating economic development as well.

Meanwhile, Malaysian Prime Minister Anwar Ibrahim expressed optimism about ASEAN’s future and Malaysia’s role in it.

“The spirit of collaboration and solidarity among ASEAN leaders is unique,” he said, highlighting the regional integration in green energy that has contributed to Malaysia’s rise as a high-tech manufacturing hub.

He emphasized that while the U.S. remains Malaysia’s largest individual investor, its economic ties with China are expanding.

“We don’t go to war or make threats; we discuss, we get a little angry, but we focus on economic fundamentals and move forward,” Anwar stated.

AI and Technology

UN Secretary-General António Guterres issued a strong warning about two growing global threats: the unchecked expansion of artificial intelligence and the climate crisis. He described these issues as unprecedented risks for humanity, requiring immediate and unified action from governments and the private sector.

On AI, Guterres acknowledged its immense potential but cautioned against leaving it unregulated. He emphasized the need for international collaboration, referencing the UN’s Global Digital Compact as a framework for responsible digital technology use.

“We must work together to ensure that all countries and people benefit from AI’s promise and potential to support social and economic progress,” he said.

He also urged the private sector not to backtrack on climate commitments and called on governments to deliver on their promise to introduce new, economy-wide national climate action plans this year.

Meanwhile, Spanish Prime Minister Pedro Sánchez called for a reform of social media governance across the EU to combat disinformation and cyberbullying.

He urged for stronger enforcement of the Digital Services Act and the expansion of the European Centre for Algorithmic Transparency’s powers.

“The values of the European Union are not for sale,” he emphasized, calling for increased funding to research social media algorithms and ensure that Europe’s brightest minds address this critical challenge.

Geopolitics and International Relations

The Davos meeting coincided with the implementation of the ceasefire between Israel and Hamas.

Palestinian Authority Foreign Minister Varsen Aghabekian expressed cautious optimism, stating:

“Optimism is not an option; it is a necessity.”

She added that she hopes the ceasefire will lead to a more sustainable peace. Addressing the humanitarian crisis in Gaza, she stressed the need for immediate aid and long-term planning.

“We must ensure that aid reaches the people,” she insisted.

Meanwhile, weeks after the sudden collapse of Bashar al-Assad’s regime, Syrian Foreign Minister Asaad Hasan AlShaibani outlined the new government’s plans.

“We will not look to the past. We will look to the future. And we promise our people that this misery will not happen again,” he declared.

He pledged to respect women’s rights, reject sectarian divisions, and called for the removal of remaining sanctions.

“Thousands are returning to Syria and need to help rebuild the country. We are turning a new page… Syria must be a nation of peace.”

In a discussion with CNN’s Fareed Zakaria, Iranian Vice President for Strategic Affairs Javad Zarif expressed hope that a second Trump presidency would reconsider its withdrawal from the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal, which Trump abandoned in 2018.

He suggested that a new Trump administration might take a more serious, focused, and realistic approach regarding the cost of withdrawing from the agreement.

“In terms of deterring Iran, [the withdrawal from the JCPOA] has failed. It has imposed significant economic costs on the Iranian people. Of course, the Iranian government is suffering, but the Iranian people—especially the most vulnerable—are suffering the most,” Zarif stated.

Private Equity Deals in the Healthcare Sector Reached $115 Billion in 2024

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This surge was driven by an increase in the number of large-scale transactions. In total, five deals exceeded $5 billion, compared to two in 2023 and one in 2022. North America remains the largest market, accounting for 65% of global deal value, while Europe and Asia-Pacific represent 22% and 12%, respectively. Deal volumes remained stable relative to historical levels, with a wave of activity in North America and Europe offsetting a 49% decline in deal volume in Asia-Pacific since 2023. These are some of the key findings from Bain & Company’s Global Healthcare Private Equity Report 2025.

For Cira Cuberes, partner at Bain & Company, the private equity market in the healthcare sector made a strong comeback last year, largely due to an influx of large-scale transactions, particularly in the biopharmaceutical space. “We also observed a resurgence of deals in the health technology sector. Looking ahead to 2025, we expect LPs to continue backing mid-market fund managers due to their strong returns and sector expertise. The smartest strategy for investors will be to focus on opportunities arising from spin-offs and incorporate value creation principles into their due diligence,” she commented.

In Europe, deal volume surpassed the peak reached in 2021, driven by a concentration of smaller deals in the first half of the year. The biopharmaceutical and medical technology sectors were two of the key drivers in 2024, as companies acquiring assets in these industries can easily expand them across the regions in which they operate. Bain remains optimistic about the European market, citing strong acquisition volume growth and a stabilizing macroeconomic environment. The firm anticipates continued momentum in deal activity and sees potential for more mega-deals.

The biopharmaceutical sector continues to lead healthcare deals in terms of total value, thanks to several major transactions in 2024. Despite the record deal value in biopharmaceutical buyouts, global deal volume in the biopharmaceutical tools and life sciences sectors declined by 5% and 10%, respectively, since 2020 in terms of compound annual growth rate (CAGR). Several factors contribute to this trend, including the struggle between buyers and sellers to align sale prices and a reduction in pharmaceutical services spending following a sharp decline in U.S. biopharmaceutical private equity funding.

Healthcare IT Dealmaking Rebounded in 2024

Several factors contributed to the resurgence in healthcare IT deals. First, providers—facing financial pressures and changes in reimbursement models—are investing in core systems to boost efficiency. In response, private equity firms are increasingly investing in assets that support workflow improvements. Additionally, payers—seeking to enhance payment integrity—are investing in advanced analytics. At the same time, biopharmaceutical companies are modernizing clinical trial IT infrastructure to accelerate and improve drug development in an environment of tighter funding and stricter regulatory requirements.

Four Trends Reshaping the Healthcare Private Equity Landscape

Mid-market funds continue to innovate: Historically, healthcare-focused mid-market funds have outperformed the broader market, benefiting from ongoing innovation and evolving investment strategies. They have also managed to sustain both asset acquisition and exits since 2020, even as the broader healthcare buyout market struggled. This strong performance has led to robust fundraising. Since 2022, mid-market funds with healthcare exposure have raised approximately $59 billion, exceeding fundraising levels from the previous three years by about 40%. While they have traditionally focused more on provider assets, mid-market private equity firms have expanded their scope to include healthcare IT and provider services while maintaining a strong presence in biopharma and medical technology.

Spin-offs unlock value in a competitive market: Despite year-to-year variability in deal activity, healthcare spin-offs have followed an upward trajectory since 2010, driven by a combination of public companies aiming to enhance shareholder value and private equity firms eager to acquire high-value assets. Successful spin-offs allow public companies to improve margins, focus on revenue growth, and reduce leverage and complexity. They also create opportunities for private equity firms to acquire overlooked assets with significant value-creation potential under new ownership. Given the reduced level of sponsor-to-sponsor deals since the 2022 peak, the combination of spin-offs and corporate deals has attracted a diverse range of investors looking to deploy capital into scalable healthcare assets with strong value-creation potential.

Maximizing exit value is a strategic imperative: Private equity exit deal volume in healthcare remained low in 2024—41% below its 2021 peak—as high interest rates and valuation mismatches between buyers and sellers extended holding periods and limited funds’ ability to return capital to their LPs. Historically, multiple expansion has driven nearly half of total deal returns, but this lever is unlikely to sustain returns to the same extent in the coming years. To execute a successful exit strategy, sellers must take an objective view of asset performance and trajectory while having a plan for future value creation. Buyers who integrate value-creation principles into their pre-acquisition diligence gain a competitive advantage.

Asia-Pacific investment has evolved: Private equity firms are expanding their investments beyond China in the Asia-Pacific region, where deal value has grown at an approximate 21% CAGR since 2016. However, deal volume in the region has declined significantly since 2023 due to a slowdown in Chinese transactions, a shift in deal volume to India, Japan, and South Korea, and increased competition from strategic players eager to pursue M&A. India, in particular, is emerging as a compelling alternative to China for dealmaking, given its expanding middle class—driving healthcare demand—and strong economic growth. Japan and South Korea are also seeing accelerated deal volume, fueled by favorable macroeconomic factors and an aging population with increasing healthcare needs.

“We are optimistic about the outlook for private equity in the healthcare sector in 2025, especially as deal multiples begin to stabilize, enabling better alignment between supply and demand, and as a growing base of tradable assets presents new opportunities. Lower interest rates in the U.S. and stable economic growth in regions like Japan and India indicate favorable investment conditions. Looking ahead, the accumulation of assets in private equity portfolios, along with increasing LP pressure for liquidity, suggests an imminent rise in sponsor exits,” concludes Cira Cuberes, partner at Bain & Company.