2018 is likely to see strong inflows to EM local markets on the back of strong performance, good value and improving fundamentals. Easier financial conditions will breathe life into domestic demand, which is three times as important as exports from a growth perspective. EM central banks should be expected to hike faster, by more and for longer than central banks in developed markets on account of EM’s normal business cycle dynamics. The combination of stronger growth and higher rates will sustain a continuation of EM currencies’ outperformance versus the Dollar through 2018 and beyond. Return prospects in all segments of EM fixed income are materially better than developed bond markets. We think the main risks to our bullish view of EM fixed income emanate from the United States, but we do not think the constraints, which have so far kept Fed policy far more dovish than in normal business cycles have gone away.