This is the view of Jack McIntyre, portfolio manager of the Legg Mason Brandywine Global Opportunistic Fixed Income Fund, who is quick to add that it will undoubtedly create opportunities in emerging markets.
He said in a recent note to investors that the Fed is "setting the tone" for tapering in December. While talk of tapering led to a spike in volatility over the summer, he believes that in December the Fed will take steps to avoid the same phenomenon by issuing forward guidance.
This is in line with others who talk of the markets already pricing in the expectation of tapering sooner rather than later.
Specifically McIntyre added that, in the absence of volatility: "There are probably some opportunities to move into higher yielding countries and currencies, specifically some of the ‘fragile five’ in emerging markets."
He also sees prospects improving, as a result of co-ordinated growth in developed markets, added to which he believes monetary policy will remain stimulative because there are no inflationary pressures.
These factors combined will bring “a positive environment for EM," he says, concluding: "I think we’re going to see capital move back into that area.”
He has increased his exposure in high quality emerging markets, including Mexico and Poland.
