While the comparatively low valuation of EM should ultimately stand them in good stead, we do not expect them to perform any better than their US counterparts this year. Fears of a bubble in the US stock market have resurfaced recently, as its valuation is now at levels last seen during the dot com bubble. In contrast, the valuation of emerging market (EM) equities is much lower. Historically, when the valuation of EM equities has been significantly below that of US equities, they have typically produced better returns in the long term.
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