MSCI emerging markets stock index rises 1%, reaching a record high.

MSCI emerging markets stock index rises 1%, reaching a record high.

MSCI Emerging Markets Index Hits Record High Amid Valuation Gaps and Global Shifts

The MSCI Emerging Markets Index reached a record high on February 23, 2026, rising 1% amid growing investor optimism for the asset class. This follows a year-to-date gain of 8.9% through May 30, 2025, outperforming the MSCI World Index (5.2%) and the MSCI USA Index (1.1%) according to MSCI analysis. Analysts attribute the surge to a combination of attractive valuations, improving fundamentals, and shifting global economic dynamics.

Emerging market equities trade at a significant discount to their U.S. counterparts, with a forward price-to-earnings ratio of 12 times compared to 21 times for U.S. stocks as of May 2025 as MSCI reports. This valuation gap, one of the widest in two decades, reflects stronger credit fundamentals in emerging markets, including a rise in corporate bond ratings post-pandemic and narrower current account deficits according to MSCI data. Additionally, many emerging market companies derive a larger share of revenue domestically or from other emerging economies, reducing exposure to U.S.-centric risks such as tariffs as MSCI notes.

The weakening U.S. dollar has further bolstered emerging market returns. The Nominal Broad U.S. Dollar Index fell 5.5% year-to-date through May 2025, historically correlating with stronger performance in emerging markets according to MSCI analysis. A weaker dollar has eased debt-servicing costs and supported capital inflows, with over $26 billion flowing into emerging market assets in October 2025 alone Lazard research indicates.

Investor interest has also grown, as evidenced by a 34% year-to-date increase in average daily volume for MSCI Emerging Markets Index futures and rising open interest according to MSCI data. However, challenges persist. Policy uncertainties, regional disparities, and sensitivity to global growth trends remain risks, despite improved macroeconomic stability in many emerging economies as MSCI reports.

Looking ahead, analysts highlight structural trends such as supply chain diversification and technological innovation as potential catalysts. For instance, the MSCI Emerging Markets Information Technology Index trades at 17 times forward earnings, compared to over 30 times for the S&P 500 Information Technology Index, offering a more affordable entry point for AI-related investments according to Lazard research.

While the current environment appears favorable, investors are urged to remain cautious, balancing opportunities with ongoing geopolitical and economic risks.