Lazard – Why Emerging Markets, Q3 2024

Lazard's "Why Emerging Markets, Q3 2024" report provides a comprehensive analysis of the investment potential within emerging markets, highlighting key factors that make these regions attractive to investors. The report emphasizes that emerging markets (EM) equities are becoming ever more attractive, as they remain one of the most mispriced asset classes globally, with valuation discounts relative to developed markets and U.S. equities hovering near 30% and 40%, respectively. While many parts of EM equity remain markedly under-owned despite their low cost, Lazard expects earnings growth to be higher in EM in 2024 compared to the developed world, driven to a great extent by emerging Asia and information technology companies. Additionally, the report notes that because fixed income markets historically tend to generate equity-like returns during the period between the end of central bank rate hikes and the completion of rate cuts, Lazard remains constructive on EM debt amid a backdrop of ongoing monetary cycle easing. Considering the dispersion in monetary and fiscal policies, the report believes ample opportunities for alpha generation in EM debt fill this election-heavy year. These insights underscore the potential for robust returns in emerging markets, driven by favorable valuations, earnings growth prospects, and supportive monetary policies.