Interview
Emerging Markets Could Keep Surging
- MSCI EM equities are projected to deliver a 15% return by 2026, with the sector anticipated to be the globally strongest performing risk asset over the next decade, despite the firm currently maintaining an underweight positioning.
- China's performance is expected to align with global EM trends in 2026 following a 2025 rally driven by multiple expansion, though the firm plans to hold Chinese equities while prioritizing other regions with superior opportunities.
- The global AI outlook remains bullish, with US dominance acknowledged alongside more attractive valuations in EM AI, where earnings are forecast to grow 30% year-over-year compared to 20% in the US.
- A custom EMAI basket is being offered to provide global exposure primarily to China, Taiwan, and Korea, with secondary allocations to semiconductors and Latin America.
- Brazil is identified as holding the most attractive global risk-reward profile, supported by a 250 basis points rate cut forecast this year that should benefit equities, with local capital anticipated to shift from fixed income to other assets as rates fall.
- Mexico is expected to perform in line with other EM countries in the mid-to-late part of the year, with significant upside potential contingent on the emergence of a market-friendly candidate in the election.
- Investment strategies in Brazil are noted to offer a 12% risk-free rate for investors unconcerned with currency exposure.
- Clarity on the US labor market is expected later in the week, with implications for Federal Reserve policy decisions in Q1 and Q2 of the current year.