The developed world’s government bond markets are showing characteristics of a bubble. Timing the end of this rally won’t be easy — but for those watching closely, hints are emerging.

As the U.S. reaches full employment, low productivity growth may signal future problems, including higher inflation and decreased profit margins.

Capitulation by many EMD investors has created opportunities in many of the more resilient countries. We favor countries moving down the reform path and where there is significant impetus to reign in excessive government spending. Valuations have reached the extremes that allow a selective approach to EM to now represent a key part of an income-oriented portfolio.