A just-published EM equities report updated our view on what had been a significant underperforming asset for many years, but which has finally come back to life in 2025.
One of our contrarian calls at the end of last year was to overweight EM equities at a time when most commentators were extremely bearish on the asset class. EM equities have delivered stellar returns and have outperformed U.S. and global peers year-to-date. While the outperformance was initially driven by investors hedging against a softening U.S. dollar as opposed to strengthening EM earnings, the outlook for the latter is now brightening. Our checklist of tailwinds/drivers to gauge the durability of the EM stock market rally is supportive of further upside.
Net: stay overweight EM within a global equity portfolio.
