The new emerging markets epoch

Companies in leading emerging markets are becoming regional and global leaders in key industries undergoing rapid technological change, including semiconductors, batteries, renewable energy and fintech.

In pure economic terms, emerging markets are well placed to take the lead in the next global equity upcycle. Low core inflation, an advantageous demographic structure underpinning steady growth in consumption and wealth accumulation, growing foreign exchange reserves, and trade surpluses. Prudent fiscal policies characterize our favored emerging economies in Central Europe, Latin America and Asia, and these positive attributes are reflected in borrowing costs and volatility that have converged with developed markets.

We believe this set-up is unique in the turbulent history of emerging markets investing and represents an opportunity to rebalance your portfolio as the Earth’s economic axis tilts once more.

Investors remain underweight many of the world’s most innovative economies and as a result they are missing direct exposure to some of the best growth companies for long-term investors.

From a macroeconomic perspective, the advantages developed markets have enjoyed in the past decade have evaporated with the fight against inflation. Quantitative easing has stopped or is disappearing, real rates are normalizing, and emerging market fundamentals are superior.

Volatility, which has traditionally been a weakness of emerging markets, is now the same as developed markets while valuation metrics show emerging markets trading at a historic discount.