Emerging market equities are positioned for a second consecutive year of outperformance in 2026, with consensus forecasts anticipating approximately 17% earnings growth — significantly outpacing developed markets.
2025 Momentum Carries Over
The MSCI Emerging Markets Index surged around 30% in 2025, outperforming all three major Wall Street averages. Frontier markets performed even better, delivering 41% returns in USD terms over the first 11 months of 2025.
What’s Driving the Rally
Several factors are converging to make EM one of the most compelling investment stories:
- A weaker U.S. dollar and more favourable global financial conditions
- Lower local interest rates across major EM economies
- Attractive valuations — EM equities trade at just 14x forward P/E, historically cheap
- Improved corporate governance and healthier fiscal balance sheets
Regional Winners
Markets such as India, Mexico, Indonesia, and parts of the Gulf stand to benefit from domestic demand strength and reform momentum. East Asian tech economies — especially South Korea and Taiwan — remain critical to global technology supply chains and continue attracting capital.
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