IMF Fall Meetings 2026 takeaways

1 Takeaway, 4 Implications, and 7 Denials at 2026 IMF Annual Meetings

• While we have been talking about “fiscal dominance” as a framing since 2012, it is now the dominant frame for looking at all sovereigns.
• The US is exceptional again. Relative to the other major developed markets (Eurozone, Japan, UK), the US is in far better shape and the structure of the Eurodollar system means money flows from those markets to the US.
• Europe is vulnerable for well-known reasons. With no fiscal and financial union, individual sovereign bond markets such as France and Spain become vulnerable (and France itself will have to fix France).
• Emerging markets remain largely exceptional for durable reasons, but emerging markets is not a monolith. Low government debt, less levered financial institutions and independent central banks support them; China and Thailand are “poster children” for reserve quality currencies.
• Not all emerging markets are following the Fed. Mexico had already diluted that principle while India and Indonesia will be tested. The divergence is seen in countries with anchored inflation, low debt and leverage.
• Developed market political risk. Although markets still assume political stability, the K-shaped recovery in the US is becoming an intractable political challenge. All this implies higher bond yields.
• US exceptionalism. The realisation that the US is “least bad” among developed markets is starting to dawn and Europe no longer gets the benefit of the doubt. All this means a stronger US dollar.
• Everyone remains an expert on geopolitics. Participants continue to largely ignore major shifts (the Gulf closure, the Black Sea blockade) meaning crude oil prices are likely to be higher for longer.
• China was everywhere and nowhere. Participants had little exposure, but we think the Chinese yuan (CNY) will appreciate while external surpluses continue. This would lead to stronger CNY and Chinese government bond (CGB) prices over time.
• India drifting, at best. With a unorthodox policy stance, repeated currency intervention and no bullish catalysts, real rates are too low to anchor the currency. As a result, Indian government bonds are a zero weight in our funds.
• Emerging markets has winners as well as losers. Winners include Brazil, Colombia, Malaysia, Thailand and China. Losers include Indonesia, India, Philippines, Turkey and Mexico. The logical asset allocation implication is be overweight the winners and underweight the losers.
• The “AI is only about capex and productivity” no longer works. AI debt issuance in 2026 transcends sovereign issuance and rising rates will find problems. US Treasury prices in the short term may end up depending on AI debt issuance.