Emerging market growth is not solely driven by the tech boom. It is supported by a cyclical recovery in non-tech capital expenditures, strengthening global labor markets, favorable financial conditions, and easier fiscal policies. This broad base suggests a more durable expansion than a single-sector story would imply.

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.

Emerging vs. developed market outperformance typically runs in 7-10 year cycles. The current 14-year cycle of EM underperformance is historically long, suggesting markets are approaching a key inflection point driven by a weakening dollar, cheaper currencies, and accelerating earnings growth off a low base.

Despite alarming geopolitical headlines concerning Venezuela, Iran, and US-NATO relations, emerging markets are showing resilience. Investors are largely ignoring this "noise," focusing on the strong cyclical backdrop: upward growth revisions, loose financial conditions, and supportive commodity prices. Markets are prioritizing the global economic outlook over political shocks unless those shocks directly threaten growth.

Stronger US growth isn't hurting EM currencies because growth is also being revised up globally in places like China and Europe. This prevents a repeat of the 'US exceptionalism' theme that typically strengthens the dollar and pressures EM assets, making the current environment less problematic for EMFX.

The narrative of "US exceptionalism" driven by equity outperformance is misleading. EM Foreign Exchange (FX) is resilient because EM GDP growth forecasts are being revised higher than in the US. EM equity indices are often poor proxies for their economies, lacking exposure to key growth drivers like AI or defense.

The industrial supercycle isn't monolithic. It presents different opportunities: 1) Tech and industrial export powerhouses (China, Japan, Korea, Taiwan), 2) Domestically-focused industrializers (India), and 3) Commodity exporters supplying the boom (Australia, Indonesia).

Unlike past economic cycles driven by consumer spending, Latin America's next growth phase will likely be fueled by capital expenditures (CAPEX) in infrastructure, AI, and factories, spurred by favorable global and local factors.

The region is experiencing a dual growth engine. It is investing heavily in its own industrial capacity while also capitalizing on its role as the "world's production house" to meet rising global demand for capital goods in sectors like AI, energy, and defense.