1. We are constructive on equity markets in 2024. Drivers include consensus expectations for a recovery in earnings growth, the likelihood of a soft economic landing in the United States, and evidence that interest rates have peaked. Over the past 30 years, emerging market equities have on average risen 14% in the 12 months following the first Federal Reserve (Fed) rate cut.

2. In 2024, more than four billion people will take part in elections, starting with Taiwan in January and culminating with the United States in November. Voters will also go to the polls in India, Indonesia and Mexico, as well as in other countries. The Indian election in April-May is expected to see the incumbent Bharatiya Janata Party (BJP) party returned to power, as the benefits from widespread reforms continue to cascade down to households and companies.

3. Consensus expectations call for a recovery in global earnings growth in 2024. Emerging market earnings growth is expected to accelerate to 18% in the year ahead, driven by South Korea and Taiwan. This represents a sharp recovery from the contraction in 2023. Price to earnings (PE) valuations for emerging market equities remain below their long-term averages. On a relative basis, the PE gap between emerging market and global equities is close to its highest level in over 20 years. Faster earnings growth in emerging markets relative to global equities may act as the catalyst to reverse the valuation discount.

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