Emerging Markets Come of AgeMar 19, 2019

Key Points

Emerging markets (EMs) have made great strides in the past few decades, yet outdated perceptions about them persist. The implications are serious. Investors who hold on to old assumptions about EMs are likely to overlook the transformation of these economies—and systematically under-allocate to the fastest-growing parts of the world.

We believe that an undeniable change in the long-term narrative for the entire asset class is taking place, driven by the pursuit of a better life. This change is so apparent that the term, “emerging” doesn’t seem to be the right nomenclature for these markets today. These economies have deliberately adjusted their policies, implementing reforms in ways that are now demonstrating results. This paper explores three areas we believe investors should pay attention to that together constitute a new reality in EMs—one that challenges enduring misperceptions:

  • New Reality #1: EM institutions have made policy improvements that should contribute to increased resilience during times of stress.
  • New Reality #2: EM economies have diversified, with consumption and technology offering new drivers of growth.
  • New Reality #3: EM companies are leapfrogging established models through innovation and technology.

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