Looking Back and Ahead: Eventful Decades for Emerging Markets

In 2010, 68% of the companies in Fortune Magazine’s Global 500 were domiciled in Group of Seven (G7) countries, compared with 17% in the E20* emerging-market (EM) countries. When 2020 ended, the percentage of E20 companies had nearly doubled to 34%. And 124 China-domiciled firms resided in the Global 500, pushing the US into second place.

That’s quite a decade for EM corporations, and an eventful one for emerging markets more broadly. In a period roughly bookended by the recovery from the global financial crisis and the COVID-19 pandemic, there were good years and bad years that required multi-asset investors to manage volatility while tapping into opportunity.

We’ve seen many attention-grabbing headlines in the past decade, but slower-moving trends may have been even more impactful. We’ll focus on two: the relationship between economic growth and valuations and a transformation from commodity-driven to technology-driven. We’ll also highlight two key trends we expect to see in the decade ahead—and a story that we believe remains timeless.

Disconnect Between Economic Growth and Equity Valuations

The years 2011 through 2020 saw a healthy expansion in emerging economies, with real gross domestic product (GDP) growth averaging 4.1% annually, handily outpacing developed markets’ 1.5%, a trend we expect to continue (Display). China led the cohort of larger countries, but many smaller countries—including Vietnam, Turkey, Ivory Coast and the Dominican Republic—posted above-average growth, too.

Yearly GDP growth forecasts through 2022 for advanced and emerging economies.

Surging economies bolstered government revenues, fundamentals and creditworthiness. All of this was reflected in strong credit returns—given superior growth and declining interest rates globally, that’s not surprising. Many countries with the fastest growth, and therefore greatest credit improvement, such as Ivory Coast and Dominican Republic, could only be accessed by debt investors.