Interview, Podcast
Emerging market equities poised to overtake developed market equities
- Global economic growth is projected to decelerate to slightly below 3% over time, driven by a worldwide population growth rate expected to approach zero within the next 50 years.
- The five largest global economies in 2050 are forecast to be China, the United States, India, Indonesia, and Germany, while seven of the top 10 economies in 2075 are expected to be current emerging markets.
- Emerging market capitalization is projected to rise from approximately 27% currently to 35% by 2030, 47% by 2050, and 55% by 2075.
- The US share of global equity capitalization is expected to decline from roughly 42% currently to 27% in 2050 and further to 22% by 2075.
- India's global equity share is forecast to increase from about 2–3% currently to 8% in 2050 and 12% by 2075, while China's share is expected to rise to 15% by 2050 before declining to 13% by 2075 due to demographic headwinds.
- Emerging market equities are anticipated to outperform over the long term via rapid growth driving earnings expansion and multiple increases correlated with GDP per capita, though US outperformance is not certain over the next decade.
- Policy shifts reducing trade and capital flow openness, particularly a potential stall or reversal of globalization, pose major risks to these capitalization forecasts.
- Generative AI presents a significant upside risk to global growth and capital markets, with anticipated impacts potentially greater for developed markets than emerging ones.
- Future investment banking activity in emerging markets is expected to be driven by the equitization of corporate assets, contingent on the trajectory of China's capital market opening.