Pendulum to swing back in favour of emerging markets

While there are short-term challenges in emerging markets as a function of trade war concerns, political ...
Steven Bell

Steven Bell

Managing Director, Portfolio Manager & Chief Economist, Multi Asset Solutions

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While there are short-term challenges in emerging markets as a function of trade war concerns, political problems, a stronger US dollar and rising US interest rates, we believe they offer tremendous investment opportunities in the longer term.

Increasingly diverse emerging markets are making an ever-greater contribution to global growth. And that trend is set to persist over the medium to long term.

We are also seeing material changes taking place at the underlying development stage in many emerging markets, with much of that being facilitated by technology. For example, hundreds of millions of people are now getting their first smartphone. This small piece of hardware – something we take for granted in the developed world – has the scope to unlock a host of new opportunities, from healthcare and education to applications that help small businesses increase their productivity and profitability on a day-to-day basis.

At the macro level, we are also seeing demographics as a significant driver of growth across many economies. Here, the prospects are most compelling in those countries where the largest proportion of the population is at its most productive age. It is interesting to observe, for example, that Mexico has reached the same production-age sweet spot that Japan did in 1970.

Risk Disclaimer

Past performance should not be seen as an indication of future performance. Stock market and currency movements mean the value of, and income from, investments in the strategy are not guaranteed. They can go down as well as up and you may not get back the amount you invest.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

Emerging markets (EM) vs developed markets (DM)

A chart of emerging markets vs developed markets
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The impacts of global changes shaping society, including technology, population growth and climate change, will be disproportionately felt across the developing world.
The long-term success of companies in these countries, therefore, hinges on their ability to integrate these and other pressing environmental and social issues pertinent to their businesses into strategic decision-making. We support the effort that companies have made to think more holistically about sustainable growth, including their impacts on the environment and society. As active stewards of capital, we will continue to engage with them to improve their overall approach to managing environmental, social and governance (ESG) risks and opportunities and, in the process, protect and enhance shareholder returns.