We recently discussed the imperative for investors to carefully consider their diversification strategies in the coming years. How do emerging markets fit into this picture? 

Persistent tailwinds?

The strong performance of emerging-market stocks in 2025 is likely to leave many investors wondering whether 2026 will deliver similar returns. 

While investors shouldn’t take anything for granted, there are reasons for optimism. Goldman Sachs notes that “some of the tailwinds that drove performance in 2025 are likely to persist in 2026,” potentially supporting strong returns. Those tailwinds include resilient Chinese exports, a depreciating US dollar, and the disinflationary effects of lower commodity prices (especially oil). 

At the same time, elevated gold prices provided an additional boost to some developing economies, reflecting strong demand for safe-haven assets. For instance, Ghana’s currency “posted an annual gain against the dollar for the first time in more than three decades” as the continent’s biggest gold producer benefited from elevated prices combined with a weaker USD. 

Beyond the case for emerging-market exposure on its own merits, EM exposure also offers a meaningful way to diversify, helping investors manage volatility, reduce concentration risk, and offset speculative excesses in US equities. 

EM is not one thing 

Of course, not all developing economies are the same. As one Goldman analyst pointed out, considering the concentration risk and volatility of US tech stocks, “when you get AI and tech-related jitters in the US market and periodic pullbacks, you get a really nice way to balance the risk with emerging markets.” However, the bank’s forecast for EM performance is based in part on tech-driven growth, with “stocks in South Korea, Taiwan, and China offer[ing] exposure to the burgeoning technology.” 

Investors need to take a broad strategic view of how they balance their portfolios. For instance, Goldman’s chief foreign exchange and emerging markets strategist, Kamakshya Trivedi, points out that investors could “have a barbell approach with tech-heavy exposure on one side and more idiosyncratic and domestic exposure on the other.” 

A key point is that investing in emerging markets doesn’t entail turning your back on US assets or taking a bearish view on developed markets. In many cases, EM exposure can complement a positive outlook on global growth. Even if you’re convinced AI will be the defining investment story of the next decade, those opportunities aren’t limited to Silicon Valley. 

A new world order? 

Looking beyond equities, many investors are also banking on strong performance from EM currencies in 2026. For instance, an ING note expresses confidence in Central and Eastern European currencies, as well as the South African rand and Turkish lira. Beyond ZAR, many African currencies showed strong gains in 2025 and may continue to attract interest. 

That said, if we have learned anything from the last few years, it is not to take our orthodoxies for granted. The architecture of finance is now rapidly shifting. As Udaibir Das trenchantly argues, “treating emerging markets as a homogeneous asset class that responds to price signals within a stable global financial regime simply no longer reflects the current operating environment.” Das points to “a fragmented institutional architecture, characterised by overlapping legal jurisdictions, competing settlement systems, closer alignment between finance and industrial policy, and the growing use of sanctions.” 

In this context, the macro consensus – that dollar softness and US monetary easing will strengthen local-currency assets – is, while plausible on its own terms, arguably not sufficient for the current moment. 

All opinions, news, research, analysis, prices or other information is provided as general market commentary and not as investment advice and all potential results discussed are not guaranteed to be achieved. The information may have been derived from publicly available sources, company reports, personal research, or surveys. Past performance is not indicative of future performance. Trading carries risk of capital loss. Service available to professional clients only.