The Fed hasn’t cut rates yet, but emerging markets are already feeling the benefits of its “dovish” stance: Emerging-market bonds and currencies posted their best week since 2017 last week after the US Federal Reserve and the European Central Bank gave their strongest hints yet that easing could soon be back on the table, Bloomberg says. The MSCI EM Currency Index saw its biggest weekly gain in almost two years, while EM bond exchange-traded funds (such as the iShares JPMorgan USD EM bond ETF and the Bloomberg Barclays EM Local Bond UCITS ETF) surged.

Investors are searching for yield as returns on US treasuries crater: Yields on safe haven assets (such as US treasuries and German bunds) have fallen in recent weeks as market certainty of renewed Fed stimulus has increased and the US-China trade spat has escalated.

This bodes well for emerging markets. “With yields across the developed world getting back to ridiculously low levels, it makes EM debt assets all the more attractive,” Eric Stein, money manager at Eaton Vance, said. Brett Diment, head of EM debt at Aberdeen Standard Investments, said that any rate cuts by the Fed will create a “pretty good environment” for EM bonds, provided the US avoids falling into recession.

Trade remains the elephant in the room. Rising geopolitical and trade tensions pose the greatest threat to EM assets, fund managers tell Bloomberg. Angus Bell, senior portfolio manager in EM debt at Goldman Sachs Asset Management, doesn’t see the US and China reaching a trade settlement any time soon, while Union Investment Privatfonds is concerned that the increasing number of geopolitical flashpoints could lead to an accident.