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Goldman Sachs forecasts emerging markets to outperform S&P 500 in 2024

Published Nov 17, 2023 11:56
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NEW YORK - Analysts at Goldman Sachs have projected that emerging markets are poised for a significant upswing in 2024, potentially outperforming the S&P 500. This optimistic forecast is underpinned by several key developments, including global disinflation trends and anticipated central bank rate cuts.

The investment bank's analysts have pinpointed a robust recovery in emerging markets following a period of challenges, notably high US interest rates, a strong dollar, and slower growth in China. This resurgence has been reflected in the notable gains across various MSCI indexes, with the MSCI China Index climbing 6.25%, MSCI Brazil surging 8.01%, and MSCI South Korea soaring 13.21%. The tech sector has been instrumental in this recovery, with companies such as Taiwan Semiconductor Manufacturing and South Korea's Hynix leading the charge.

Goldman Sachs' analysis suggests that the overall MSCI Index could see a return of 13.8% in 2024, eclipsing the S&P 500's expected gain of 8.2%. The firm attributes this potential performance to progress made in global disinflation and the possibility of rate cuts within emerging markets.

The favorable outlook for emerging markets has been further bolstered by a recent cool inflation report on Tuesday, which triggered optimism about an end to the Federal Reserve's rate hikes. The report coincided with a decline in the dollar and a drop in Treasury yields to 4.46%, conditions that typically encourage investors to take on more risk and consider reallocating capital outside of the United States.

DataTrek analysts have described the fourth quarter as a competitive "race" between the S&P 500 and emerging markets, with the latter being characterized as underdogs. However, with the Fed and other G10 central banks nearing the end of their rate-hiking cycles—a factor that previously stymied growth in emerging markets—the stage is set for these regions to potentially outshine their developed counterparts in the upcoming year.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Goldman Sachs forecasts emerging markets to outperform S&P 500 in 2024
 

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