Towards the end of last year, we asked whether it was time to switch allocations towards emerging markets. Early indications in 2023 suggest that such a move could indeed be opportune. They suggest that markets have become less concerned about the macroeconomic conditions that weighed on valuations through last year, a period in which the MSCI Emerging Markets index fell by a fifth in dollar terms.
That’s not to say that volatility won’t be a feature of related indices this year, but we know that emerging markets have recovered from previous cyclical downturns ahead of their US and European counterparts, plus earnings revisions for emerging markets in the coming year moved into positive territory in late 2022.