Emerging Markets Investing Statistics (2026)

After years in the shadow of US stocks, emerging markets had a breakout 2025. The MSCI Emerging Markets Index returned about 33.6% for the year, its strongest since 2017, versus roughly 18% for the S&P 500 and 21.1% for the MSCI World (see the table below).

That reversal was fueled by a weaker dollar, an AI-driven surge in Asian chip and memory stocks, and valuations that had fallen to their widest discount versus developed markets in two decades. Whether it marks a lasting turn or a single strong year is the central question for 2026.

Year to year, EM and US returns swing hard and often in opposite directions. EM fell about 20% in 2022 alongside US stocks, lagged badly in 2023 and 2024 as the S&P 500 compounded above 25%, then leapt about 33.6% in 2025 (see the chart below).

This is the defining feature of the asset class: long stretches of underperformance punctuated by sharp catch-up rallies. Timing the turn is notoriously hard, which is why most diversified investors hold a fixed EM slice rather than trading in and out.

US dominance is not permanent. From 2000 to 2009, the S&P 500 returned about -0.9% a year, its own "lost decade," while the MSCI EM Index compounded at roughly 9.8% annually (see the table below). Leadership then flipped completely for the 2010s and early 2020s.

Over the most recent 10 years, US stocks won decisively: the S&P 500 ETF returned about 15.0% a year versus about 9.2% for the emerging-markets ETF. History suggests these regimes rotate, which is the core argument for owning both rather than betting on one.

Emerging markets are enormous economically but small in the stock market. They are home to about 86% of the world's population and roughly half of global GDP, yet make up only a bit over 11% of global stock market capitalization on the free-float MSCI ACWI IMI (see the table below).

The gap partly reflects measurement: on a broader basis that includes tightly held domestic listings, EM was closer to 27% of global market cap. Either way, EM companies are about 37% of the world's listed firms, a much larger share than their market weight.

Why do markets that produce roughly half the world's output carry only about a tenth of its investable market cap? Much of EM corporate value sits in state-owned or family-controlled firms that are not fully floated, and EM stocks trade at deep discounts, so the same earnings command a far lower price than in the US.

Goldman Sachs Research expects the gap to narrow as capital markets deepen and more companies list, projecting EM's share of global market cap will rise toward about 35% by 2030 and 47% by 2050 (Goldman Sachs).

"Emerging markets" sounds diversified, but the index is not. Roughly $79 of every $100 goes to just four countries: Taiwan (about 25%), China (about 22%), South Korea, and India (about 11-12%), with Brazil and Saudi Arabia the largest of the rest (see the chart and table below).

Taiwan recently overtook China as the single largest weight, driven by TSMC and the AI-chip boom. That means a broad EM fund is, in large part, a concentrated bet on North Asian technology rather than a spread across 24 developing economies.

China once dominated the index. Its weight climbed toward about 40% of the MSCI EM benchmark by late 2020, then fell to roughly 22% by 2026 as regulatory crackdowns, a property slump, and geopolitical risk weighed on Chinese equities and lifted the relative weight of Taiwan, Korea, and India.

The decline has been large enough that MSCI now publishes an EM ex-China index for investors who want emerging exposure while managing China risk separately. China's stocks still trade at a steep discount, currently around a third cheaper than India's on valuation.

India has been the structural winner. Its MSCI EM weight has risen toward 11-12% on strong earnings, a deep domestic-investor base, and demographics, and in late 2024 India briefly overtook China in the broader MSCI ACWI index for the first time before China rebounded.

The trade-off is price: India is one of the most expensive markets in EM, trading at a large premium to China and to the EM average, so its long-run appeal rests on sustained double-digit earnings growth rather than cheap valuations.

Concentration is even sharper at the stock level. Taiwan Semiconductor alone is about 14.5% of the index, and together with Samsung Electronics and SK Hynix, three semiconductor names exceed 28% of the entire benchmark (see the table below).

The top 10 holdings account for roughly 32.4% of the index. That means EM performance is now tightly linked to the global chip and AI cycle: when memory and foundry demand booms, as in 2025, EM soars, and when it cools, the index is exposed.

By sector, information technology is about 28-30% of the index and financials about 21-22%, followed by consumer discretionary near 11-12% and communication services around 9%. Counting related names, technology broadly makes up close to 45% of EM.

That tilt has changed the character of the asset class. The old caricature of emerging markets as commodities and cheap manufacturing is outdated; today a broad EM fund is dominated by chipmakers, internet platforms, and banks concentrated in a handful of Asian economies.

Higher potential returns come with a rougher ride. The MSCI EM Index has an annualized standard deviation of roughly 22%, well above about 16% for developed markets outside the US and about 14% for US stocks (see the chart below).

Drawdowns are deeper too: EM's maximum peak-to-trough decline reached about 62% in past crises, versus about 54% for the MSCI World. Currency swings, political risk, and thinner liquidity all amplify the moves, which is why position sizing matters.

The bull case rests on price. At the end of 2025 the MSCI EM Index traded at a forward P/E near 13.4 against roughly 22-24 for US stocks, about a 40% discount and near the widest since 2003, while the S&P 500's Shiller CAPE sat around 37.9 (see the table below).

EM also yields more, about 2.3% versus roughly 1.1% for the MSCI USA. Cheap valuations do not guarantee returns, and EM has looked cheap for years, but a wide discount plus a weaker dollar is historically the setup for outperformance.

Currency often decides EM returns for a US investor. EM equities have tended to underperform when the dollar strengthens and outperform when it weakens, and EM local-currency debt carries about a 0.71 quarterly correlation with the US dollar index.

That link was central to 2025: a softening dollar amplified EM gains for US-based holders. Morgan Stanley has estimated that each 1% fall in the dollar draws roughly $360-440 million into EM local-currency debt, a flow that supports the whole asset class.

Most guidance points to a modest, fixed slice. Vanguard's guidelines cap emerging markets near 20% of total equities, and a global market-cap-weighted international fund holds roughly 22% in EM, which itself is only about 11% of world market cap (see the table below).

The cheapest broad exposure comes through ETFs: iShares Core MSCI EM (IEMG) holds about $155-160 billion at 0.09%, and Vanguard FTSE EM (VWO) about $120 billion at 0.07%. The main difference is that VWO excludes South Korea, which FTSE classifies as developed.