The MSCI Emerging Markets Index surged to a new all-time high in 2026, gaining 14 percent this year in a rally that has outpaced the S&P 500’s 5.6 percent return and defied fears of a global energy shock.
"People still mentally write off the emerging markets because ‘they’re ex-growth, because China is still the dominant market at 30%, and why bother when the U.S. is so good’,” said Sarah Ketterer, chief executive of Causeway Capital Management. “But in the emerging markets [there] are some amazing growth stories.”
The rally was powered by a boom in artificial intelligence that lifted key supplier markets in Asia and the resilience of commodity-exporting economies. South Korea’s Kospi index has soared 57% in 2026, while Taiwan’s Taiex is up 34%. Brazil’s Bovespa has gained 16%. The gains were underpinned by double-digit climbs in technology giants like Samsung, which jumped 84%, and Taiwan Semiconductor Manufacturing Co.
The surge in developing economies comes as investors pour capital into the technology sector, with tech-focused ETFs seeing record inflows of $14.2 billion in April, according to Morningstar data. This AI-fueled frenzy has offset the blow from rising energy prices for import-reliant nations like South Korea.
At the same time, some emerging economies are better positioned to withstand disruptions from geopolitical conflict. Brazil, which became a net oil exporter in 2017, has been insulated from higher energy prices. Rystad Energy expects the country’s crude production to grow faster than anywhere else on its continent, reaching 4.76 million barrels a day by 2030.
“As you talk with our Latin American commercial partners, they’ve fared very well during this,” said Joe Brusuelas, chief economist at RSM. “They sort of brushed it off, like water off the back of a duck.”
Even after the strong performance, emerging-market stocks remain relatively cheap compared to their U.S. peers. Companies in the iShares MSCI EM exchange-traded fund recently traded at 18.4 times their past 12 months of earnings, according to FactSet, compared with a price/earnings ratio of 28.9 for the iShares Core S&P 500 ETF. This valuation gap could attract further investment, though the market’s concentration in the AI trade raises questions about diversification.
This article is for informational purposes only and does not constitute investment advice.
