In conversation with Jim Hayes of Lucerna Capital, we talk about Emerging Markets, Macro Trends and some of the most compelling investment opportunities right now. TL;DR Emerging markets are entering a new multi-year upcycle after a decade of underperformance driven by a strong USD, weak commodities, and capital outflowsMacro tailwinds are turning: weaker USD, rising commodities, and global fiscal expansion are improving growth and liquidity conditionsEM remains cheap, under-owned, and low expectation, creating asymmetric upside if the cycle continuesThe opportunity is more diversified than past cycles, with less reliance on China and broader drivers across regionsKey regional themes: India (private banks as compounding financial plays), Latin America (~50% overweight on valuation + political shift), and Africa (early-stage infrastructure/telecom growth)Main risk is global liquidity tightening, especially rising US bond yields and fiscal deficits, which could trigger volatility or recession but potentially reset the cycleStructural positioning avoids China (structural/regulatory risks) and crowded AI/semiconductor trades in favour of under-owned, mispriced assets.Core strategy is bottom-up stock picking with macro + country risk overlay, focusing on risk-reward, catalysts, and disciplined position sizing across two strategies (long-only + low-net long/short) The discussion provided a comprehensive strategic view of emerging markets, emphasizing their entrance into a long up-cycle fuelled by macroeconomic shifts and valuation opportunities. The core thesis is that emerging markets are entering the early stages of a multi-year upcycle after more than a decade of underperformance. From roughly 2010 onwards, the asset class was held back by a combination of a strong US dollar, weak commodity prices, and persistent capital outflows toward developed markets. The result was a prolonged period of weak earnings growth, depressed valuations, and structural under-allocation by global investors. That backdrop is now beginning to reverse. A weaker US dollar is easing financial conditions, commodity prices are rising, and global fiscal expansion is driving demand for real assets and infrastructure. Unlike the 2002–2009 cycle, which was heavily dependent on China’s commodity demand, the next phase is expected to be broader and more diversified—with growth driven by financials and domestic demand in India, infrastructure and telecom in Africa, and policy-led recoveries across Latin America. For investors, this shift matters because emerging markets are coming off a low base. Valuations remain discounted relative to developed markets, capital is still under-allocated, and expectations are muted. This creates the conditions for asymmetric upside if the cycle continues to play out. However, this is unlikely to be a linear recovery. The biggest risk is global liquidity tightening, particularly from rising US bond yields and expanding fiscal deficits, which could slow growth and redirect capital flows. In the near term, this may lead to volatility or even a recession—but it could ultimately reset and extend the cycle, reinforcing the case for long-term outperformance. Lucerna’s portfolio reflects thematic bets on structural shifts and valuation disparities across emerging market regions and sectors. Disclaimer: This podcast is for informational and educational purposes only and does not constitute financial, legal, or investment advice. The views expressed by the hosts and guests are their own and do not necessarily reflect the views of Lucerna Global Capital or any of its officials. Nothing in this podcast should be construed as a solicitation to buy or sell any security or fund. Listeners should consult with a qualified professional for specific advice tailored to their individual circumstances. We are not responsible for any losses or liabilities incurred by acting on information from this podcast.
