Remember when everyone was obsessed with U.S. stocks like they were the only game in town? Well, plot twist: emerging markets just quietly became the cool kids at the investment party, and honestly, it’s about time someone noticed.
The MSCI Emerging Markets index is up a whopping 29% this year – which, for context, is better than literally every major U.S. and European benchmark. That’s right, while everyone was arguing about whether the S&P 500 was overvalued, emerging markets were out here doing their thing, month after month, like that friend who consistently gets promoted while you’re still figuring out your career.
Goldman Sachs just caught on (fashionably late, as usual) and raised their target for the MSCI EM Index to 1,480 – that’s another 9-10% upside from current levels. Their research team is basically saying “we think this party is just getting started,” which in Goldman speak means “we’re finally paying attention.”
So What’s Actually Driving This Rally?
Three main things are making emerging markets the investment equivalent of that viral TikTok everyone’s talking about:
1. The Fed’s Rate Cut Vibes
When the Federal Reserve cuts rates, investors get that “risk-on” energy and start hunting for better returns. It’s like when your favorite restaurant lowers prices – suddenly everyone wants in.
2. AI Demand is Real
Turns out, all those AI chips and tech components? A lot of them come from places like South Korea, Taiwan, and China. Goldman expects emerging market corporate earnings to jump 9% in 2025 and 14% in 2026. Not too shabby.
3. Dollar Weakness = EM Strength
When the U.S. dollar acts less like the main character, emerging market currencies get their moment to shine. It’s basic economics, but with more drama.
Where the Smart Money is Going
Goldman’s research team (who probably have very strong opinions about everything) highlighted some specific opportunities:
Korean stocks are apparently trading below book value – about 70% of them. That’s like finding designer clothes at thrift store prices, if you’re into that sort of thing.
Saudi Arabian stocks could see up to $10 billion in foreign investment as ownership restrictions ease. Sometimes regulatory changes create real opportunities.
South African stocks are getting a boost from rising gold prices, because apparently gold is having its own moment too.
The one place Goldman isn’t feeling the love? India, where valuations are sky-high and tariff concerns are real. Even in a bull market, some things are just too expensive.
Look, investing in emerging markets isn’t exactly revolutionary – it’s been a thing for decades. But sometimes the obvious play is obvious for a reason. While everyone’s been obsessing over the Magnificent Seven and AI stocks, emerging markets have been quietly delivering consistent returns.
The moral of the story? Sometimes the best opportunities are hiding in plain sight, being boring and consistent while everyone else is chasing the shiny new thing. Who knew?