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Franklin Templeton Fixed Income Fixed Income

From tactical to core: The evolving role of emerging market debt

Foundational improvements in market structure and policy frameworks have strengthened emerging markets’ (EM) resilience to external shocks.

Franklin Templeton Fixed Income

Published date

August 4, 2026

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Executive summary:

  • Foundational improvements in market structure and policy frameworks have strengthened emerging markets’ (EM) resilience to external shocks. As many EM countries have adopted more prudent monetary and fiscal policies, they are also increasingly distinguishing themselves from major advanced economies.
  • In our view, treating EM debt primarily as a tactical allocation is increasingly disconnected from the maturation and resilience of the asset class. While EM debt should not necessarily become the single core building block of a portfolio, we see merit in considering it as a structural component of a long-term, diversified investment strategy.
  • Within the context of a broader portfolio, EM debt exposure can provide consistent yield advantages and distinct return drivers to support income generation and portfolio diversification. However, heterogeneity across countries makes an active, country-by-country approach critical.

Follow Michael Hasenstab, Ph.D.

Michael Hasenstab, Ph.D. avatar
Executive Vice President, Portfolio Manager Chief Investment Officer Templeton Global Macro

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The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton ("FT") has not independently verified, validated or audited such data.  Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

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