After years of lagging, emerging markets are now asserting themselves again.
What’s driving the revival is not a single spark but a confluence of forces. One of the most potent is a weakening U.S. dollar. As the greenback drifts lower, the burden of dollar-denominated debt becomes lighter across many developing economies. That, in turn, frees up liquidity and reduces financial stress in places previously vulnerable. Simultaneously, monetary policy in parts of the developed world is beginning to ease, softening the headwinds that once pushed capital away from riskier markets.
Against this backdrop, emerging markets are beginning to offer a rare combination: solid earnings growth and appealing relative valuations. Analysts at Goldman Sachs recently raised their 12-month target for the MSCI Emerging Markets Index, pointing to earnings growth of roughly 9 per cent this year and 14 per cent in 2026, driven in no small part by stronger exposure to technology and artificial intelligence. They expect gains also in emerging market currencies, which historically benefit when equities outperform and capital rotates inward.
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.
