Emerging Markets and Investment Trends in 2026
The world of finance is looking towards emerging markets with optimism, especially after they outperformed many developed markets in 2025. This trend is expected to continue in 2026, driven by a broad rally in emerging market stocks and local-currency bonds. Wealth managers believe that emerging markets offer attractive opportunities, particularly in the technology sector, which includes artificial intelligence (AI).
Why Emerging Markets?
Wealth managers like Ronald Temple, chief market strategist at Lazard, believe that emerging markets are appealing due to their lower valuations compared to their US counterparts. The MSCI Emerging Market Technology sector trades at approximately 40 percent below its US counterpart, offering multiple uncorrelated growth drivers. This presents a significant opportunity for investors looking to diversify their portfolios.
Growth Drivers in Emerging Markets
Nakul Zaveri and Souleymane Ba, co-heads of LeapFrog Investments Climate Investment Strategy, share this optimism. They highlight that continued dollar weakness could provide a sustained tailwind for emerging market assets, supporting further outperformance. As US and European rates trend lower, the real rate differential moves in emerging markets’ favor, making them more attractive to investors.
Emerging Market Valuations and Stability
Emerging market public market valuations still look relatively inexpensive, creating opportunities to invest in high-growth companies at attractive risk-return profiles. Certain emerging market central banks have tamed inflation, which could lead to monetary stability heading into 2026. Additionally, emerging market countries and corporates have cleaner balance sheets, further enhancing their appeal.
Commodities: Gold and Defence
In the commodities sector, gold is experiencing a rally driven by structural demand from central banks in emerging economies. The trend reflects a clear preference for security over returns, driven by declining confidence in the US dollar system and concerns about secondary sanctions. Gold’s proven role as an inflation hedge makes it an attractive asset for investors seeking resilience amid geopolitical and financial uncertainty.
Defence Spending on the Rise
The defence sector is also gaining attention, with the intervention in Venezuela affirming the need for heightened defence spending and resilience in a fragmented world. US defence outlays are set to surpass $1 trillion in 2026, while Europe is leading the response with new NATO guidelines pushing core defence spending to 3.5 percent of GDP plus an additional 1.5 percent for infrastructure. This presents a compelling long-term investment theme, offering resilience, diversification, and upside amid rising geopolitical risk and global fragmentation.
Conclusion
In conclusion, emerging markets, particularly those with exposure to AI and digital technology, are poised for continued growth in 2026. The appeal of emerging markets, combined with the attractiveness of gold as a hedge against uncertainty and the increasing importance of defence spending, provides investors with a range of opportunities. As the global economic landscape continues to evolve, investors would do well to consider these trends when making their investment decisions. With the right strategy, investors can navigate the complexities of the global market and find success in the emerging trends of 2026.
