War in Ukraine, indirect inflation, interest rates, China’s faltering economic recovery, supply chain fragility, and geopolitical tensions have joined rank with higher global taxation and continued monetary tightening. In 2024, developed economies continue on a low-growth, low-return curve.
Following a decline in 2023, earnings growth anticipations for 2024 and 2025 have moved higher for emerging economies compared to developed economies, including the United States, to 17 per cent and 15 per cent respectively.
Emerging economies’ debt and equity is one of the most mispriced asset classes, with 5.3 per cent of global investments allocated to emerging economies equities. At a discount rate of 30 per cent, emerging economies’ valuations remain inexpensive compared to developed economies. The discount may narrow in the next years, due to stronger earnings growth, recovering profitability, and a higher economic growth premium in favor of emerging economies.
