The emerging-market equity benchmark continued its upward trajectory in October, marking a 10th consecutive month of gains, propelled by a surge in artificial intelligence and a depreciating dollar that encouraged capital inflows.
The MSCI Emerging Markets Index, which has experienced monthly increases from January through October, saw a rise of approximately 30% year-to-date, with an overall 4% gain for October despite a 0.7% decline on the final trading day of the month.
Several factors have contributed to this remarkable performance, notably strong gains within AI-focused technology stocks in Asia and a weaker dollar prompting investment managers to seek diversification away from U.S. assets. In China, targeted economic stimulus measures have bolstered earnings estimates and improved investor sentiment.
“Emerging-market stocks now encompass more than just banks, commodities, and telecom sectors,” remarked Sammy Suzuki, head of EM equities at AllianceBernstein in New York. “Today, technology, consumer, and medical sectors, characterized by substantial intellectual property content, represent significantly larger portions of the market.”
Despite the overall positive trend, emerging-market assets faced “modest pressure” on Friday as investors reviewed the potential for the Federal Reserve to maintain interest rates in December, according to Brendan McKenna, an economist and foreign exchange strategist at Wells Fargo Securities in New York.
Fed Chair Jerome Powell noted during a press conference post-rate decision that there are “strongly differing views about how to proceed in December.”
“If the Federal Reserve opts against a rate cut in December, or if there is another unforeseen shock, emerging markets are stretched in terms of valuations, which could lead to a sharp correction,” McKenna stated. “The new uncertainty is driving modest profit-taking in select asset classes.”
Emerging-market stocks are achieving better performance compared to their U.S. counterparts for the first time in eight years, leading money managers, including those at Morgan Stanley, to project the beginning of a multi-year rally.
EM bonds also experienced gains this month, with the Bloomberg EM Sovereign Total Return Index of dollar-denominated bonds registering its seventh consecutive month of growth. Meanwhile, the gauge for emerging market foreign exchange (EMFX) edged lower in October.
Furthermore, risk assets might gain from a perceived reduction in tariff tensions following a trade truce between China and the U.S. “The essential point is that, even in the absence of extensive incremental detail, the optimistic rhetoric from President Trump and the announcement of trade deals have alleviated some uncertainties this week,” wrote Citigroup Inc. strategist Rohit Garg in a client note. This sentiment has contributed to an increased “risk-on” environment in global equities.
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Published on November 2, 2025.
