Goldman Sachs The Markets Why emerging markets could keep rallying
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May 30, 2025 Stratford Dennis, Head of Emerging Market Equities at Goldman Sachs, shares insights on the thriving potential of emerging markets. He delves into the factors driving their recent rally, like growth differentials and a weakening dollar. A highlight is Brazil's promising investment landscape, bolstered by favorable economic indicators and political changes. Dennis also discusses how U.S. bond market trends can significantly impact emerging markets, showcasing a highly interconnected global financial ecosystem.
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Emerging Markets Rally Drivers
- Emerging market equities have rallied due to positive growth differentials, a weaker dollar, and a stable or rising S&P 500.
- These three factors together create a strong environment for emerging markets to outperform.
Emerging Markets Positioned for Upside
- Emerging market equities could continue to outperform with attractive valuations and financial conditions compared to developed markets.
- Underweight positioning by institutional investors offers room for significant inflows fueling further rallies.
China vs EMX China Dynamics
- China's equity market has cooled after initial post-stimulus gains and depends heavily on trade policies and potential stimulus.
- EMX China (emerging markets excluding China) is driven more by dollar and global risk sentiment, making it more favorable currently.