Contrary to historical perception, emerging markets (EM) have evolved into a more resilient and reliable asset class. Improved policy frameworks, healthier fiscal and current account balances pre-crisis, and better inflation control mean EMs are better positioned to withstand global shocks than in the past, shifting them from 'racy' to 'reliable'.

In a reversal of historical norms, emerging market policymakers have been more disciplined with monetary and fiscal policy. This has led to lower average inflation in EM countries, creating attractive opportunities with real yields that are significantly higher than in developed markets.

Unlike previous years dominated by a single theme, 2026 will require a more nuanced approach. Performance will be driven by a range of factors including country-specific fiscal dynamics, the end of rate-cutting cycles, election outcomes, and beneficiaries of AI capex. Investors must move from a single macro view to a multi-factor differentiation strategy.

While regions like LATAM and EMEA are still in a disinflationary phase, Asia's negative inflation surprises have ended. It's now experiencing small upside surprises, suggesting its monetary policy will diverge, with central banks remaining on hold, contrary to easing trends elsewhere.

While US equities have traditionally been a bellwether for global sentiment, a significant rotation is underway. Stagnant US tech stocks are being overshadowed by strong performance elsewhere, with European equities up 6% and Emerging Market equities up 13%. This suggests capital is flowing into other markets, reducing EM's dependence on US performance.

The Israeli startup ecosystem thrives due to a unique combination of factors: extreme geographic talent density, resilience forged from national challenges, and a culture where seeing a peer achieve a massive exit (like Wiz) immediately raises the ambition for everyone else.

The Israeli Shekel has reached historically expensive levels compared to its Asian tech-geared peers like the Taiwanese Dollar and Korean Won, diverging from historically stable relationships. This, combined with palpable central bank and exporter concern over its strength, makes the Shekel a prime candidate for a valuation-driven reversal against its Asian counterparts.

With US exchanges raising listing thresholds, a gap is emerging for companies valued under $10B. The robust and high-performing Tel Aviv Stock Exchange is positioned to become the premier global venue for these 'non-mega' tech company IPOs.

Past geopolitical flare-ups in the Middle East created risk premiums in local markets (e.g., Israel) that were brief and reversed quickly. Consequently, analysts advise against positioning for these events, viewing them as manageable risks rather than strategic opportunities, especially as hedging options like market volatility are already priced high.