Emerging Markets Surpass Expectations#

Emerging-market stocks are currently exceeding expectations, bouncing back to record levels despite concerns about geopolitical conflicts. The MSCI Emerging Markets Index has risen approximately 14% this year, significantly outperforming the S&P 500, which has only gained 5.6% during the same timeframe.

AI Demand Fuels Growth in Asian Tech#

A major factor behind this surge is the rapid expansion of artificial intelligence (AI) infrastructure. Key technology suppliers in South Korea and Taiwan are experiencing significant increases in their market values as they provide crucial hardware for global tech companies. South Korea’s Kospi index has jumped 57% in 2026, while Taiwan’s Taiex has risen by 34%. Notable companies like Samsung and Taiwan Semiconductor Manufacturing Co. (TSMC) have seen impressive gains, with Samsung's stock climbing 84% this year alone. These tech advancements are helping to mitigate the effects of rising energy prices, especially in countries like South Korea, which relies heavily on oil imports from the Middle East.

Brazil and Oil Exporters Thrive#

Beyond Asia, investors are showing a preference for oil-exporting nations that are less reliant on Middle Eastern energy. Brazil stands out with its Bovespa index increasing by 16% this year. Since becoming a net oil exporter in 2017, Brazil is on track to boost its crude oil production to 4.76 million barrels per day by 2030, marking the fastest growth in South America. This reduced vulnerability to energy price fluctuations has allowed Brazil’s materials and financial sectors to provide substantial dividends to investors. The iShares MSCI Brazil ETF has nearly quadrupled in size over the past year, reaching around $12 billion.

Valuation Advantage for Emerging Markets#

Despite the recent gains, emerging-market stocks remain more affordable compared to U.S. stocks. The MSCI Emerging Markets ETF is trading at approximately 18.4 times earnings, while the S&P 500 is at 28.9 times earnings. This valuation difference continues to attract investors looking for growth opportunities outside the U.S.