Emerging Markets Poised for a Surge: Goldman Sachs Predicts 14% Profit Growth by 2026
Nine consecutive months of gains for the MSCI EM index – a benchmark for large and medium-sized companies in emerging economies – isn’t a fluke. According to Goldman Sachs Research, this upward trajectory is set to continue over the next 12 months, fueled by a potent combination of rising corporate profits, portfolio diversification, and anticipated interest rate cuts from the US Federal Reserve in a weakening dollar environment. But where exactly should investors focus their attention? The answer, according to the latest analysis, lies in a dynamic shift towards select Asian economies and beyond.
The Broader Emerging Market Outlook
Goldman Sachs has adjusted its forecast for the MSCI EM index, projecting a rise to 1,480 points within the next year, a significant jump from the 1,378 points recorded on October 16th. This optimism isn’t simply based on macroeconomic factors. The investment bank anticipates robust corporate profit growth – 9% in 2025 and a substantial 14% in 2026 – indicating a fundamental strengthening of businesses within these economies. This growth is attracting increased investment, as portfolios seek diversification beyond traditional markets.
China and South Korea: Tech and Governance Lead the Way
While broad-based growth is expected, certain regions stand out. China and South Korea are highlighted as possessing particularly strong growth potential, largely due to their prominent positions in the technology sector and the burgeoning field of artificial intelligence. These nations aren’t just benefiting from the demand for tech; they’re actively shaping it.
In South Korea, ongoing corporate governance reforms are expected to unlock further value and boost investor confidence. Meanwhile, China is making strides in regulating competition and pricing within its productive sectors, creating a more stable and predictable environment for businesses. These policy changes are crucial for sustained, long-term growth.
Untapped Potential: India, Saudi Arabia, and South Africa
The report doesn’t overlook opportunities in other emerging economies. India and Saudi Arabia, which have underperformed earlier in the year, are poised to benefit from deregulation initiatives. Removing bureaucratic hurdles and fostering a more open market environment could unlock significant investment and economic activity in these nations. This represents a potential turning point for investors who may have previously overlooked these markets.
South Africa also presents a compelling case, particularly due to the rising price of gold, which benefits its substantial mining industry. A recovery in overall economic growth and lower financing costs are expected to further bolster domestic sectors. This confluence of factors makes South Africa an increasingly attractive destination for investment.
The Stablecoin Factor: A New Catalyst for Emerging Market Growth?
Beyond traditional economic indicators, Goldman Sachs is also highlighting the potential impact of stablecoins. The bank predicts a “gold rush” in the stablecoin market, which could profoundly transform both the US Treasury bond market and the broader crypto industry. US Treasury Secretary Scott Bessent anticipates that digital currencies backed by assets like Treasury bills will become a major driver of demand for government debt, potentially channeling significant capital into emerging markets.
Navigating the Future: A Shift in Global Investment
The convergence of these factors – strong corporate profits, portfolio diversification, favorable monetary policy, and the rise of stablecoins – paints a compelling picture for emerging markets. Investors are increasingly recognizing the potential for higher returns and long-term growth in these dynamic economies. The next 12-24 months are likely to be pivotal, as these trends solidify and reshape the global investment landscape. Successfully navigating this shift will require a keen understanding of regional nuances and a willingness to embrace new opportunities.
What emerging market opportunities are you most excited about? Share your insights in the comments below!
