The Case for Emerging Markets

Economic growth, earnings acceleration and bargain prices favor EM stocks.

- BY ANNE KATES SMITH

WHILE all eyes have been on the runaway U.S. bull market, emerging-markets stocks have delivered impressive results. The MSCI Emerging Markets stock index returned 29.7% in 2025 through November, far ahead of the S&P 500's 17.8% gain. Emerging-markets fans say the rally is just the beginning of a long-term trend, supported by an evolving world order focused on deglobalization that will accelerate earnings growth and favorable currency swings in emerging markets over a period of several years. “The U.S. market and the U.S. dollar have been kings for 15 years,” says Arjun Jayaraman, a portfolio manager and head of quantitative research at Causeway Capital Management. “We’re finally starting to see cracks in that.”

A weaker dollar is a plus for international stocks, with overseas returns translating into more greenbacks back home. Extended pressure on the dollar could lead to a repatriation of global capital out of the U.S. and into emerging markets, says Michael Kass, portfolio manager of Baron Emerging Markets (symbol BEXFX). That process tends to play out over long cycles. “We’re near an inflection point in the dollar and long-term capital flows,” he says, adding that a major bear market in the dollar isn’t necessary for emerging markets to prosper.

“If the dollar is flat, that’s going to be good.”