Pie chart of global population: U.S.: 4%; Developed markets ex-U.S.: 10%; Emerging markets: 86%.
Pie chart of percent contribution to global gross domestic product (purchasing power parity): U.S.: 16%; Developed markets ex-U.S.: 26%; Emerging markets: 58%.
Pie chart of global equity market capitalization: U.S.: 64%; Developed markets ex-U.S.: 26%; Emerging markets: 10%.
Pie chart of bonds outstanding: U.S.: 40%; Developed markets ex-U.S.: 45%; Emerging markets: 15%.
Sources: International Monetary Fund World Economic Outlook database, January 2024; Morgan Stanley Capital International (MSCI), as of March 31, 2024; and Bloomberg, as of March 31, 2024. Emerging markets includes frontier markets. Purchasing power parity (PPP) is a theory which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries. Stock capitalization is based on country weightings in the MSCI All Country World Index. MSCI All Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. Bonds outstanding is based on market value of bonds issued tracked by the Bloomberg Global Aggregate Index. The Bloomberg Global Aggregate Index measures global investment grade debt including treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An index is unmanaged and not available for direct investment. Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions. Foreign investing has additional risks including currency, transaction, volatility and political and regulatory uncertainty. These risks are heightened in emerging and frontier markets. Bonds are subject to market, interest rate, price, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
Key Takeaways
- Emerging markets’ (EM) demographic advantage underscores their growth potential, which is likely to reassert itself as global shocks subside. Their relatively small global stock capitalization creates the potential for capital market growth.
- EM fixed income’s relatively weak performance in 2023 highlights its vulnerability to rising interest rates, less ample credit, and to a strong U.S. dollar. We expect EM bond issuance to gradually return to pre-pandemic levels as the dollar peaks and Federal Reserve policy transitions from a pause in rate hikes to interest rate cuts.