Emerging market stocks were abandoned by many after being routed in the first three weeks of 2016. In the two years since, though, the MSCI Emerging Markets Index has gained 80%, including a blazing start to 2018.
Valuations, however, haven't budged, as earnings have totally kept pace with the rise in prices. If earnings continue to meet expectations, that would mean another 30% gain in EM stocks in order to keep P/E levels from falling. Checking forward P/E levels, in fact, shows emerging market stocks as cheaper today than they were before the Nov. 2016 U.S. presidential election.
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