A shift in global monetary conditions is reshaping the investment outlook for emerging markets, according to Sebastian Mullins, head of multi-asset at Schroders Australia. Schroders is a global investment manager with a presence in Australia, offering a range of financial products and services. Mullins said the end of a long period of US dollar strength and high Federal Reserve interest rates has relieved pressure on emerging economies, enabling their central banks to prioritise domestic growth.
Mullins noted that emerging market policymakers previously had limited flexibility, but this constraint is now easing. With US interest rates declining and the US dollar weakening from its peak, many emerging markets can now reduce their own interest rates to stimulate growth without the risk of significant currency depreciation. This newfound freedom is creating more attractive investment opportunities in these markets.
Furthermore, substantial global investment in artificial intelligence is boosting demand for physical infrastructure, which supports Asian economies at the core of the technology supply chain. Simultaneously, shifts in global trade and supply chains are benefiting countries like Mexico as manufacturing activities relocate closer to consumer markets.
While Schroders maintains a positive outlook on global equities through 2026, they anticipate a broader distribution of leadership. Mullins stated that US markets have generated strong returns, but valuations are high. He concludes that as conditions evolve, emerging markets have greater autonomy, presenting investors with one of the most compelling opportunities the asset class has offered in recent years.
