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J.P. Morgan: EM Value Stocks Poised for Continued Outperformance

  //stocks-investing.news-articles.net/content/202 .. -stocks-poised-for-continued-outperformance.html
  Published in Stocks and Investing on Monday, February 23rd 2026 at 14:49 GMT by Seeking Alpha
      Locales: UNITED STATES, UNITED KINGDOM

New York, NY - February 23rd, 2026 - Emerging market (EM) value stocks are poised for continued outperformance, according to a recent analysis by J.P. Morgan strategists. The firm's report, released this morning, suggests that the significant gap in performance between EM value and EM growth witnessed over the past year isn't an anomaly, but rather a trend with considerable runway. This forecast comes at a time when global investors are increasingly re-evaluating traditional investment styles, questioning the decade-long dominance of growth stocks and seeking alternative sources of return.

For years, growth stocks - companies expected to grow at above-average rates - have been the darlings of the market, fueled by low interest rates and a relentless pursuit of innovation. However, the economic landscape is shifting. Rising interest rates, coupled with increasing geopolitical uncertainty and maturing economic cycles, are creating a more favorable environment for value investing.

The Value Proposition in Emerging Markets

J.P. Morgan's analysis zeroes in on the particularly attractive opportunities within emerging markets. Value stocks, characterized by low price-to-book ratios, low price-to-earnings ratios, and high dividend yields, are currently trading at a considerable discount compared to their EM growth counterparts. This valuation gap is a key driver of the firm's bullish outlook. Strategists believe this disparity presents a compelling entry point for investors.

The report highlights several factors underpinning this potential for further gains. Firstly, EM value stocks often represent established companies in sectors like financials, energy, and materials - industries that tend to benefit from rising inflation and commodity prices, trends that have been evident in early 2026. These companies are often less reliant on future projections and more grounded in current earnings, offering a degree of resilience in a volatile market.

Secondly, the potential for a broader rotation away from growth stocks is expected to disproportionately benefit EM value. After a prolonged period of outperformance, growth stocks are facing increased scrutiny. Investors are becoming wary of overvalued companies with stretched valuations and are increasingly seeking out assets with tangible value and solid fundamentals. This shift in sentiment could trigger a significant influx of capital into EM value stocks.

Historical Performance & Diversification Benefits

The firm points to the substantial performance differential between EM value and EM growth over the past twelve months as further evidence of this emerging trend. While growth stocks have struggled to maintain their momentum, EM value has consistently delivered strong returns, demonstrating its ability to navigate challenging market conditions. Data compiled by J.P. Morgan shows EM value indices have outperformed growth indices by over 15% in the last year, a figure that has caught the attention of institutional investors.

Furthermore, J.P. Morgan emphasizes the diversification benefits of incorporating EM value into a well-rounded portfolio. Emerging markets, in general, offer exposure to different economic cycles and growth drivers than developed markets. Adding a value tilt further enhances diversification by reducing correlation with other asset classes. This is particularly important in the current environment, where global economic conditions are becoming increasingly complex and interconnected.

Challenges and Risks Remain

However, the report isn't without caveats. J.P. Morgan acknowledges that investing in emerging markets carries inherent risks, including political instability, currency fluctuations, and regulatory uncertainty. These risks are amplified by the ongoing conflicts in several key regions and the potential for further disruptions to global supply chains. Investors should carefully consider these factors before allocating capital to EM value.

Specifically, the firm advises conducting thorough due diligence on individual companies and focusing on those with strong balance sheets, experienced management teams, and sustainable competitive advantages. They also recommend a long-term investment horizon, as emerging market value strategies may experience periods of underperformance in the short term.

Looking Ahead

Despite these challenges, J.P. Morgan remains optimistic about the outlook for EM value. The firm believes that the favorable macroeconomic environment, attractive valuations, and potential for a style rotation create a compelling investment opportunity. They recommend that investors consider EM value as a core component of a diversified portfolio, with a target allocation of 5-10% depending on individual risk tolerance and investment objectives. The report concludes by stating that "while past performance is not indicative of future results, the current conditions suggest that EM value has the potential to continue to outperform in the years ahead."