• We expect global economic growth to remain resilient and accelerate throughout this year, given that financial conditions are more accommodative. The FED could still cut interest rates twice more in 2026.
• This should continue to feed back into greater corporate visibility, with earnings that continue to be revised upward with more potential in emerging markets.
• In this regard, the superior performance of ex-US markets this year would extend to 2026, also leveraged by a weaker dollar, the AI investment cycle, and more attractive relative valuations.
• The dollar is expected to maintain its downward trend in 2026.  

Emerging Markets  

EM (Emerging Markets) equities have extended their outperformance through 2026, based on a 31% return in 2025 and currently outperforming DM by 9.7% (YTD) in USD terms. The case for EM diversification remains strong, and we believe EM equities are an effective way to capture key macroeconomic themes: (1) continued AI momentum, expressed through EM technology leaders in Korea, Taiwan, and China. The rapid rebound in the memory market has provided a significant tailwind, particularly for Korean technology; (2) increased monetary easing in EM: policy adjustments are broadly favorable, with 14 of the 23 EM central banks within the MSCI EM complex still expected to cut rates; and (3) Weaker USD: the dollar is likely to remain on a weakening trajectory, which continues to support a stronger EM market. 

Key global AI platform: Accelerated investment in artificial intelligence is consolidating emerging markets as key players in technology, semiconductors, and digital infrastructure, led by China, Taiwan, and South Korea, with a dominant role as AI enablers (chips, hardware, data centers) and AI adopters. 

Valuations remain attractive. EM stocks continue to trade at a significant valuation discount, with a forward P/E multiple of 13x compared to 20x for DM. Corporate earnings momentum is solid, with positive EPS revisions and investor positioning still well below historical averages. 

High potential. From a technical standpoint, the emerging market ETF is beginning to consolidate at historic highs, and from a fundamental standpoint, the EM market consensus target price is 18% above current levels.  

For more information, check out the following report. 

DISCLAIMER.

Investment Team Stockbroker