‘Quiet-Quitting’ of US assets fuels fresh EM, gold bets

Market Performance - The MSCI Emerging Markets Equity Index has risen for a second consecutive day and achieved a fifth straight week of gains, marking its longest winning streak since May, with an increase of approximately 7% this year, outperforming the S&P 500's roughly 1% advance [1][12] - The MSCI EM Latin America Index closed at its highest level since 2018 and rose another 1.3% on Friday, resulting in a 7.6% weekly gain [4][5] Investor Sentiment - There is a record pace of cash inflow into emerging-market funds as investors rotate out of US holdings, contributing to a record high for the EM stocks gauge [4][12] - The National Bank of Poland, the world's largest reported gold buyer, has approved plans to purchase an additional 150 tons of gold, indicating strong demand for precious metals [8][13] Currency Movements - Currencies such as the Brazilian real, Colombian peso, and Chilean peso have appreciated by more than 3% this year, reflecting a trend of diversification away from US assets [8][13] - China's central bank has set the yuan's daily reference rate stronger than the 7-per-dollar level for the first time in over two years, signaling a tolerance for the currency's rally [2][12] Regional Developments - The benchmark for Emerging Europe, Middle East, and Africa has risen on all five days of the week, on track for its best month since 2020, indicating a broadening of the rally beyond Asian technology shares [4][12] - Political shifts in Latin America and robust global growth, including an AI spending boom, are contributing to the positive momentum in emerging markets [7][12] Market Outlook - The combined value of emerging markets is nearly $36 trillion, approximately half of the US market valued at $73 trillion, suggesting potential for growth despite geopolitical tensions [11][13] - Themes of de-dollarization and fiscal profligacy are re-emerging, which could positively impact EM risk premia [11][12]