Emerging markets (countries like India and Brazil) might give better returns than U.S. stocks in 2026. They are growing faster, have cheaper stocks, and some markets (like Vietnam) are being added to big indexes, which can increase prices.

The IMF expects emerging markets (EM) to grow about 4% next year, while the U.S. economy will grow around 2%.EM = faster growth + lower valuations + index flows.

But there are risks too, like trade problems, China’s economic slowdown, or currency changes. The article will explain forecasts, good investment options, and the risks so you can decide if investing outside U.S. stocks is worth it.

Now it’s time to look beyond U.S. equities and your 401(k).

Why 2026 could favour EM over U.S. equities

• Stronger Growth in EM: The IMF expects emerging and developing economies to grow a little above 4% in 2026, noticeably faster than advanced economies. That gap matters for corporate profits and stock returns.


• Earnings Momentum: Analysts see EM earnings rebounding faster than the U.S., partly because many EM firms are still expanding market share and benefiting from local demand and exports.


• Valuation Gap: EM equities trade far cheaper than U.S. stocks on aggregate. Lower P/Es mean small earnings beats translate into bigger share gains for EM than for U.S. large caps.


• Index Upgrades and Passive Flows: Upgrades, most notably Vietnam’s FTSE Russell reclassification, can trigger billions in passive inflows when they take effect, creating immediate demand. FTSE Russell flagged Vietnam’s upgrade effective Sept 21, 2026 (subject to review), a catalyst investors are already pricing in.


• A Weaker Dollar if the Fed Eases: If U.S. rates ease and the dollar cools, EM assets typically attract capital as yield and currency prospects improve.

Stock Market Forecast 2025: EM Rally Kicks Off with India and BRICS Leading

Emerging markets (EM) are already doing well - the MSCI EM index rose 7% in September 2025, marking nine straight months of growth. Goldman Sachs expects more gains, predicting the index will reach 1,480 by the end of the year - about 8% higher in U.S. dollar terms.

The main reason: companies in emerging markets are earning more. Their profits are expected to grow by 9% in 2025 and 14% in 2026, faster than U.S. companies.

India is leading this rise. The IMF expects India’s economy to grow by 6.2% in 2026, driven by strong tech exports that make up 22% of its GDP. Other BRICS countries are also improving — China is pushing reforms, South Korea’s AI industry is booming (though many stocks are still cheap), and Saudi Arabia could see $10 billion in new investments.

Here's the 2025 snapshot in numbers:

Overall, 2025 looks like a strong year for EM markets — but the real test will come in 2026, when U.S. tariffs might disrupt the momentum.

When Is the Next Bull Market? H1 2026

The next bull market? Look to H1 2026, when EM equities could outrun US stocks by 5-10% returns. JPMorgan highlights a 2.5% EM-US growth gap in 2025, widening as Fed rate cuts weaken the dollar and pull cash abroad.

EM stocks trade at a P/E of 12 – half the US's 22 – making them a bargain for value hunters. A big catalyst: Vietnam's FTSE upgrade to emerging market status in September 2026, unlocking $3.5-6 billion in fresh inflows (like India's past windfall).

Three clear signs that the bull market will start soon:

• BRICS Wealth Shift: Nations like India and Saudi Arabia are reallocating trillions, boosting local stocks.


• India's Nifty Index: 25% upside potential from cheap valuations and 6.2% growth.


• EM Equities Surge: Overall 25% gains over two years, per analyst calls.

For US folks, this means EM could hedge against domestic slowdowns. Track it with our S&P vs. global forecast tool.

Invest in Emerging Markets: Top Picks and Easy US Investor Tips

Ready to invest in emerging markets? Start small – EM adds growth without ditching your US core. Focus on low-cost ETFs for instant access.

Top picks for 2026:

• India (INDA ETF): Tracks Nifty 50; up 15% YTD on tech boom.


• Broad EM (VWO ETF): Covers 4,000+ stocks; 0.08% fees, $70B assets.


• BRICS Stock Highlight – Saudi (KSA ETF): $10B inflows expected; energy/tech mix.

From the US, buy via Vanguard or Fidelity apps – no passport needed. Use a Roth IRA for tax-free gains. Aim for 10-20% portfolio allocation to balance risks.

EM vs. US at a glance:

Pro tip: Dollar-cost average monthly to ride volatility. Learn more on ETF basics for beginners.

Emerging Markets Outlook Risks: Tariffs, China, and How to Play Safe

No rally without bumps. The emerging markets outlook for 2026 includes US tariffs (17-18% hikes) potentially dragging EM growth by 0.5%. Trump's policies could hit exports hard, especially in China.

China's slowdown adds pressure: Cheap goods flooding India and Africa, sparking trade spats. Geopolitics? Watch Middle East tensions for Saudi plays.

Stay safe:

• Stick to India (only 1% GDP from US trade).


• Diversify BRICS stock picks – mix Korea AI with Vietnam manufacturing.


• Hedge with gold ETFs, as gold's rally boosts EM currencies. (From Bloomberg: Gold's surge is a bonus for EM stability.)

Overall, risks are real but manageable – Fed easing keeps the market rally alive. Dive deeper into tariff threats.

Conclusion: EM Isn’t Hype — It’s Opportunity

Prepare, don’t panic. The emerging markets outlook 2026 points to a winner: 14% earnings growth, India at 6.2%, and a FTSE boost for Vietnam. For US investors, it's a smart side bet – cheaper, faster, and tariff-resilient with the right picks like VWO or INDA. Don't chase the next bull market alone; blend it with your US holdings for steady wins.

If you want to track this trade, begin a small EM position now and build over time as the macro picture clarifies. The next bull phase for EM may reward those who are both patient and prepared.