2026 Outlook Diversify outside the US

Advisor takeaways for client conversations:

  • The economic backdrop supports renewed growth for emerging markets.
    As fundamentals improve alongside structural tailwinds, the market environment is expected to support continued recovery for emerging markets in 2026.
  • Asia presents opportunity for AI outside US markets.
    When seeking opportunity in artificial intelligence (AI), look beyond the US. Asian tech companies, for example those in Taiwan and South Korea, are proving to be an important part of the supply chain and remain attractively valued relative to US counterparts.
  • Look beyond the US, but with selectivity and diversification.
    Using selectivity to seek durable franchises that are aligned to secular growth trends can help investors diversify their portfolios outside the US.

Emerging markets (EM) equities are entering a renewed growth phase, driven by improving fundamentals and powerful structural tailwinds – led by AI and reform momentum. Balance sheets have strengthened, inflation has eased, and earnings growth is expected to remain robust in 2026, supporting a sustained recovery.

Outside the US, Asia stands at the center of the AI opportunity. The region dominates the global AI supply chain, spanning advanced semiconductors, memory, and packaging, and is capturing a large share of AI-related capital expenditures (capex). Taiwanese and South Korean technology leaders benefit from superior earnings visibility and remain attractively valued relative to US peers.

Elsewhere, AI infrastructure and platform monetization offer selective opportunities in China amid a fragile recovery, while India is at an early stage of AI adoption, supported by digital partnerships and policy reforms.

Across regions, we also see positive labor and corporate reforms, which have the potential to improve corporate dynamics.

Overall, improved fundamentals and structural tailwinds appear to support a constructive outlook for EM equities, though volatility from elections and trade negotiations underscores the importance of seeking durable franchises with long-term staying power amid the policy noise. Investors may benefit from reassessing their exposure outside the US, using an approach based in diversification, selectivity, and a focus on companies aligned with secular growth trends.

EM tech stocks trade at a large discount to their US peers
Next 12 months P/E – MSCI Emerging Markets IT Index relative to S&P 500® IT Index

Next 12 months P/E – MSCI Emerging Markets IT Index relative to S&P 500® IT Index chart

Source: FactSet; data from December 1, 2015, to November 30, 2025. P/E = price-to-earnings ratio.

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The price-to-earnings (P/E) ratio is a valuation ratio of a company’s current share price compared to its earnings per share. Generally, a high P/E ratio means that investors are anticipating higher growth in the future.

The MSCI Emerging Markets Information Technology Index is designed to capture the large- and mid-cap segments across 24 emerging markets (EM) countries. All securities in the index are classified in the information technology sector according to the Global Industry Classification Standard (GICS®).

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