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Emerging Markets: New Growth Engine?

  //stocks-investing.news-articles.net/content/2026/01/29/emerging-markets-new-growth-engine.html
  Published in Stocks and Investing on Thursday, January 29th 2026 at 2:32 GMT by This is Money
      Locales: UNITED KINGDOM, UNITED STATES, JAPAN, CHINA

Emerging Markets: The New Growth Engine?

The narrative surrounding emerging markets continues to gain traction. Fund managers are increasingly highlighting the potential of regions like India, China, and Southeast Asia, areas that have demonstrably been playing catch-up to developed economies. The allure is straightforward: emerging markets often present higher growth potential and, consequently, the possibility for more significant returns. While these markets naturally carry increased volatility, the perceived reward appears to outweigh the risk for many. The expectation is that sustained domestic demand and improving infrastructure will fuel economic expansion in these regions.

AI: Beyond the Hype - Sustainable Growth or Bubble Risk?

Artificial Intelligence remains a dominant theme in investment discussions. Despite a substantial rally in AI-related stocks, many fund managers maintain a bullish outlook, believing that the transformative potential of the technology is far from fully realized. However, increasing scrutiny is being applied to valuations, and the focus is shifting toward identifying companies with sustainable AI applications - those that are integrating the technology into core business functions and demonstrating real-world impact, rather than relying on hype alone. The key question now is whether AI can deliver consistent results beyond initial enthusiasm.

Commodities: Supply, Demand, and Geopolitical Factors

The commodities market is also attracting attention, driven by a combination of factors including constrained supply chains and rising global demand. Energy, particularly oil and gas, and industrial metals remain favored plays, benefiting from infrastructure development in emerging markets and the ongoing energy transition. Geopolitical events continue to introduce volatility, but also contribute to price increases in specific commodities. Investors are hedging against potential disruptions and capitalizing on the anticipated long-term demand.

Key Fund Manager Perspectives (2026 Update)

Several prominent fund managers offer specific insights into their strategies:

• Pictet: Retaining their conviction from previous years, Pictet continues to favor Japan. Their thesis centers on the resilience of the Japanese economy, particularly its ability to weather global economic storms due to its unique demographic profile and corporate structure. They believe Japan's aging population, while presenting challenges, also fosters stability and a focus on long-term value.

• JPMorgan: JPMorgan's cautious stance on the US economy has solidified. Concerns about overheating, persistent inflation, and the potential for further interest rate hikes continue to weigh on their outlook. They are advocating for a more diversified portfolio and a reduction in exposure to US equities. The belief is that the US economy, while still strong, is facing headwinds that will limit future growth.

• Allianz: Allianz remains optimistic about China's economic recovery. They anticipate that government stimulus measures and a gradual easing of pandemic-related restrictions will unleash pent-up demand and drive economic growth. However, they also acknowledge the risks associated with China's property sector and geopolitical tensions.

• abrdn: abrdn continues to champion private credit as a compelling investment opportunity. They believe that private credit offers attractive risk-adjusted returns, particularly in a rising interest rate environment. The increasing demand for alternative funding sources has created a favorable environment for private credit providers.

Navigating the Risks in 2026

The overarching consensus among fund managers is that 2026 will present a more challenging investment environment than the preceding year. Global growth is projected to slow, inflation remains a concern (albeit moderating in some regions), and interest rates are expected to remain elevated for longer than initially anticipated. This confluence of factors requires a more nuanced investment approach, with a focus on diversification, risk management, and long-term value. The critical takeaway is that successful investing in 2026 will require a careful assessment of individual risk tolerance and a commitment to staying informed about evolving market dynamics.