Emerging market stocks are gaining attention once again, as multiple factors converge to improve their relative standing versus developed markets. The broad benchmark for emerging markets has already delivered a strong return in the year to date, outpacing its developed‑market counterpart.
One key driver has been the weakening of the US dollar alongside a deceleration in US interest‑rate rises. A weaker dollar supports emerging‑market growth by reducing the burden of dollar‑denominated debt and lowering the cost of imported goods, thereby improving earnings potential and corporate investment environments.
Valuations also favour the emerging space: the average price‑to‑earnings ratio of the emerging‑markets index sits materially below that of US equities, implying room for multiple expansion should fundamentals hold.
At the same time, near‑term sentiment enhancements are supporting equities in these regions. For instance, optimism around the resolution of a US government shutdown triggered a rally in emerging markets, illustrating how global risk sentiment and policy maneuvers can ripple through regions with higher correlation to global growth. When US policy uncertainty eases, emerging markets tend to benefit.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
