XEMD ETF

Recent data is highlighting why investors should consider adding more exposure to emerging markets. S&P Global research found that at the end of April, the Emerging Market PMI Output Index was sitting at 53.6.

Emerging markets debt proved sturdy in 2023. And more of the same could be on the way this year.

Last year, the market consensus was that there would be a recession in the second half of 2023. Instead, economic indicators have consistently outperformed market expectations.

Despite poor performance in 2022, emerging markets sovereign debt funds outperformed U.S. Treasury and investment-grade corporate bond indexes in 2023. And given resilient global conditions, including moderate inflation and a weakening U.S. dollar, EM debt could be an appealing asset.

It's the end of the year, so for investors, that means seeking tax-loss harvesting opportunities. And emerging markets bond investors in particular should really consider tax-loss-harvesting their positions.

While the headlines for emerging markets (EM) weren't great in 2022, things have picked up since last year. Local EM interest rates and currency markets have been quite compelling, thanks in part to high interest rates and decelerating inflation momentum.

Emerging markets debt has been a top fixed income performer for the third quarter, according to BondBloxx. This is especially noteworthy given the lower duration and higher income component.