Emerging-market stocks fall below half the valuation of US equities for first time in two decades

Stocks in developing economies are now trading at less than half the price-to-earnings multiple of their US counterparts. That hasn’t happened in at least twenty years, and it’s forcing a conversation about whether the trade of the decade is sitting right in front of everyone’s face. The MSCI Emerging Markets Index is carrying forward P/E ratios somewhere between 11.6x and 13.5x, while the S&P 500 continues to command multiples north of 20x. That puts the discount at roughly 40-50%, well above the historical average of 25-28%. To put it in simpler terms: investors are paying twice as much for a dollar of expected US earnings as they are for a dollar of emerging-market earnings. The numbers that make the case In 2025, the MSCI EM Index returned 33.6%, nearly doubling the S&P 500’s 17% gain. Consensus earnings growth forecasts for emerging markets in 2026 sit above 20%, comfortably ahead of projections for US and other developed markets. The growth engines are identifiable and concrete. Taiwan and South Korea are deeply embedded in the AI supply chain, manufacturing the chips and components that power everything from data centers to autonomous vehicles. Latin American commodi...