Can Emerging Markets Keep Rallying in 2026? | The Informed Investor 31

Episode 31: You need to invest in emerging markets if you want a globally diversified portfolio, right? That may seem like an obvious choice considering emerging markets account for roughly 12% of the world's equity market capitalization. But it's easy to understand why many investors might say no to emerging markets. Uneven returns tell the story. From 2015 through 2024, the broad US stock market gained an annualized +12.6% while international developed markets added +7.7%. Emerging markets? A measly +3.6%. Then came 2025. As concerns mounted about the seemingly high relative prices of US stocks and the decline of the US dollar against other currencies, emerging markets returned +31.4%, almost doubling the return of the US market. Any investor who had shunned emerging markets probably regretted their lack of wanderlust. This evidence suggests that a longer-term lens is critical when evaluating opportunities in emerging markets. A broad view is helpful, too. Emerging markets comprise more than 20 countries, including large economies like Brazil, China, and South Korea as well as tiny ones like Colombia and Indonesia. But predicting which ones will deliver outsize (or undersize) returns is impossible. In 2025, Colombia was the top gainer at +112% while Indonesia, at –2.8%, brought up the rear. In 2024, it was Taiwan (+34.4%) and Egypt (–31.2%). And the leaders and laggards were also different in 2023, 2022, and 2021. Based on the difference between the highest and lowest average returns in emerging markets from 2005 through 2025, it's fair to say they are more volatile than developed markets. Which may scare some investors. But ignoring emerging markets means avoiding opportunities to offset weak performance in one market with stronger returns elsewhere. In Episode 31 of The Informed Investor, Dimensional's Mark Gochnour, Head of Global Client Services, Rob Harvey, Co-Head of Product Specialists, and Jake DeKinder, Head of Client Communications, survey the emerging markets landscape and lay out what investors should look for through their viewfinders. Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Risks include loss of principal and fluctuating value. Diversification does not eliminate the risk of market loss. Sources: Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes; MSCI data © MSCI 2025, all rights reserved. LINKS FROM TODAY'S EPISODE: The Informed Investor: Feedback Survey https://www.dimensional.com/us-en/informed-investor-survey The Informed Investor on YouTube https://youtube.com/playlist?list=PLCyJr6FFig-h1mA7rVP7Mbk0irFw2wA90&si=0mJiRGEkZqYosieU The Informed Investor, Episode 2, "Should You Invest Outside the US" https://www.youtube.com/watch?v=gmiL0GM01bg&list=PLCyJr6FFig-h1mA7rVP7Mbk0irFw2wA90&index=30&pp=iAQB Dimensional Fund Advisors Shorts on YouTube https://www.youtube.com/@dimensionalfundadvisors/shorts Mark Gochnour on LinkedIn https://www.linkedin.com/in/mark-gochnour-9a23598a/ Rob Harvey on LinkedIn https://www.linkedin.com/in/robkharvey/ Jake DeKinder on LinkedIn https://www.linkedin.com/in/jake-d-4105b98/ Learn more at https://www.dimensional.com/