Thoughts on EM vs. DXY Heading into Q3

Been watching the EM space closely, particularly how it's been reacting (or not reacting) to the recent dollar strength. My current read is that we're likely to see a period of increased volatility and perhaps a slight retrenchment in EM assets as the DXY finds its footing around the 106-107 level. I'd put the odds of the DXY holding above 105 through July at around 65-70%. The reasoning here isn't solely about rate differentials, though that's a factor, but more about what appears to be a recalibration of global risk appetite. We're seeing some rotation back into developed market safe havens, and while EM growth stories remain compelling long-term, short-term flows tend to follow that initial knee-jerk reaction.

This isn't to say EM is dead in the water, far from it. Rather, I think we're going to see a more selective environment. Countries with stronger fiscal positions and less reliance on external financing will likely weather this better. Currencies in the LATAM region, for instance, might face renewed pressure. I'm less concerned about some of the larger Asian economies, which seem to have more domestic levers to pull. The SAP stock, at 197.33, showing resilience today, suggests that certain sectors within the broader market are still attracting interest, even if the overall macro picture for EM remains somewhat nuanced. It's a selective game now, more than ever.