Major Wall Street institutions are turning bullish on emerging markets, backing them to outperform amid shifting global dynamics – including a weaker US dollar and dramatic downgrade to the US credit rating.
Financial giants Bank of America and JPMorgan have publicly upgraded their outlooks, with Bank of America declaring that that emerging markets will be “the next bull market”. Their reassessment reflects growing confidence in the structural tailwinds now supporting emerging markets.
The long positive run for US equities over recent years – fuelled by a handful of technology stocks known as the Magnificent Seven – may be losing momentum. So far this year, the MSCI Emerging Markets Index is up 8.6% – compared to just 1% for the S&P 500 Index1.
Meanwhile, uncertainty around US trade and tariff policy is prompting investors to look beyond the US in search of stable, long-term growth opportunities.
With more compelling valuations, many now see emerging markets as the next major global growth story.
A recent CNBC article, Emerging markets are the next 'bull market' says market watchers, highlights the drivers behind this shift – and why large institutions are acting now. It could be time to review your emerging market exposure too.
The drivers supporting the emerging markets rally appear to be deep and durable, with an economic backdrop that looks supportive for the long term.
Valuations remain attractive. Emerging market equities are currently trading at a 50% discount to developed markets – the widest gap in over 20 years, as we highlighted in our article “Double discounts” on emerging markets? | TEMIT. And with many investors still underexposed, even a modest shift in positioning could drive meaningful upward momentum.
Do valuations, earnings and investment trust discounts signal opportunity?
Crucially, the long-term fundamentals are stronger than ever.
Together, these trends suggest a compelling long-term investment opportunity.
Many UK investors may be more underexposed than they realise. Emerging markets make up 40% of the global economy4, yet many global equity indices allocate just 10% to these markets. That means global funds may not offer full access to this growth story – but it’s easy to adjust.
Templeton Emerging Markets Investment Trust (TEMIT) is the UK’s first and largest emerging markets trust with over £2 billion in assets under management. It’s an easy way to increase your exposure to some of the world’s most dynamic regions.
With accelerating growth and compelling valuations, this could be an ideal time to act. A long-term allocation can help ensure your portfolio keeps pace with the rising size and influence of emerging markets within the global economy.
Shares in TEMIT qualify as an investment which can be held through an ISA. TEMIT is available through a stocks and shares ISA from a number of different companies. Your financial adviser will be able to give you full details of the options available to you.
What are the key risks?
The value of shares in the Templeton Emerging Markets Investment Trust PLC (TEMIT) and any income received from it can go down as well as up and investors may not get back the full amount invested. There is no guarantee that TEMIT will meet its objective. TEMIT invests in equity securities of emerging markets companies. Emerging markets have historically been subject to significant price movements, often to a greater extent than more established equity markets. Performance may also be affected by currency fluctuations.
As a result, the share price and net asset value of TEMIT can fluctuate significantly over relatively short time periods. Other significant risks include borrowing risk, derivative instrument risk and share price discount to NAV risk. Past performance is not an indicator or a guarantee of future performance.
For more details of all the risks applicable to TEMIT, please refer to the Key Information Document, Investor Disclosure Document and the risk section in TEMIT’s Annual Report, which can be downloaded from our website www.temit.co.uk/resources/literature.
Important Information
This article is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares. Nothing in this document should be construed as investment advice. Opinions expressed are the author(s) at publication date and they are subject to change without prior notice.
Subscriptions to shares in TEMIT can only be made on the basis of the Investor Disclosure and Key Information Documents, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter.
Any research and analysis contained in this article has been procured by Franklin Templeton for its own purposes and is provided to you only incidentally. Data from third party sources may have been used in the preparation of this article and TEMIT has not independently verified, validated or audited such data. References to particular industries, sectors or companies are for general information and are not necessarily indicative of TEMIT’s holding at any one time. References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. An index is unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. Important data provider notices and terms are available at www. franklintempletondataresources.com.
