Verdad argues that emerging markets may offer a compelling opportunity as valuations, demographics, and capital flows shift in their favor after a prolonged period of underperformance. The paper highlights that EM equities have lagged developed markets by over a decade, creating a valuation gap that some investors may be underappreciating.
Emerging Markets Crisis Investing
Verdad
Daniel Rasmussen
Research
56 Pages
Key Takeaways
Valuation Discount Exists: Emerging market equities trade at roughly 12–14x earnings versus ~20–22x for developed markets, implying a ~30–40% discount.
Long Underperformance Cycle: EM stocks underperformed developed markets by over 50% cumulatively across the past 10–12 years, creating mean reversion potential.
Demographic Growth Advantage: EM countries account for over 80% of global population growth, supporting higher long term GDP growth relative to developed markets.
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