Emerging-market stocks are now trading at less than half the price-to-earnings multiple of US equities, a gap not seen in at least two decades. The MSCI Emerging Markets Index carries forward P/E ratios between 11.6x and 13.5x, while the S&P 500 commands multiples above 20x. In 2025, the MSCI EM Index returned 33.6%, nearly double the S&P 500’s 17% gain. Consensus earnings growth forecasts for emerging markets in 2026 stand above 20%, driven by AI-related semiconductor manufacturing in Taiwan and South Korea, and by commodity producers in Latin America. Goldman Sachs and State Street are among the firms pointing to improving fundamentals as reasons to take the EM story seriously.
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