Emerging Markets: A Better Deal for Growth

Goldman Sachs

Research

8 Pages

Goldman Sachs Asset Management highlights how emerging markets may offer a more attractive long-term growth profile than developed markets, supported by structural improvements and valuation gaps. Despite recent volatility, investor concerns appear elevated relative to fundamentals, with EM positioned to benefit from stronger earnings growth and shifting global dynamics.

Key Takeaways

Underallocation Gap Exists: Average portfolios allocate about 6% to EM versus a suggested 15% allocation, indicating a roughly 9% shortfall relative to EM’s share of global opportunity.
Valuation Discount Persists: EM equities trade at 10.4x P/E, about 20% below their historical average and at a 21%–27% discount relative to developed and US markets.
Improving Debt Dynamics: EM current account deficits improved from over 3.5% in 2013 to near balance, while bond markets expanded from under $500B to over $4T.
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