1. Tariffs in emerging markets (EMs): The 1 August deadline for reaching a trade agreement with US President Trump has passed, and many EMs have failed to secure a deal. India, Brazil and Taiwan are among the larger countries that are facing tariffs of 25%/40%/20% respectively. We expect negotiations to continue and remain optimistic that an agreement will eventually be reached, possibly at the new normal tariff rate of 15% that Europe and Japan recently agreed to with Trump.

2. Banks and interest rates: The US Federal Reserve (Fed) and the Bank of England appear to be adopting a wait-and-see approach to further interest rate cuts, while the European Central Bank may have reached the end of its easing cycle. The impact of rising tariffs on US inflation is one factor giving the Fed pause for thought. Nevertheless, it is clear to us that the global easing cycle is ending, with positive implications for bank stocks, which tend to experience falling net interest margins and in turn profitability as rates decline..

3. China growth air pocket: There are signs that the Chinese economy may be going through a growth air pocket. The government’s crack-down on disorderly competition in the manufacturing sector is showing signs of impacting output, as signaled by recent purchasing manager indexes showing a softening in manufacturing output. While reducing disorderly competition may reduce deflation risks, it may also require additional stimulus to support growth.

Templeton Emerging Markets Investment Trust (TEMIT)

TEMIT is the UK’s largest and oldest emerging markets investment trust seeking long-term capital appreciation.

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