Investment managers – St James's Place, Aberdeen Investments, Franklin Templeton Institute and Union Bancaire Privée – share their insights on the case for emerging markets in 2026, and outline investment opportunities in other markets such as Europe, fixed income.

A number of investment managers remain positive about the outlook for emerging markets in 2026, as well as seeing opportunities in other markets such as Europe. This is despite concerns about the impact of the Middle East conflict, which has tested the resilience of Asian and emerging markets, many of which are oil importers.

For Justin Onuekwusi, chief investment officer at UK wealth manager St James's Place, emerging markets are still an important component of his asset allocation, supported by attractive relative valuations and diversification benefits. “We are, however, mindful of rising concentration risk here, particularly as the technology sector becomes a larger index component – exceeding that of the US in some cases. This highlights the importance of looking beyond headline allocations to underlying index composition,” he said in the firm’s outlook for the third quarter of 2026

Onuekwusi's stance was echoed by Aberdeen Investments in its third quarter 2026 outlook. “Emerging markets broadly remain resilient, supported by AI-linked capital expenditure, though performance varies between regions. China continues to benefit from AI and green-tech demand, although weak domestic consumption and property sector challenges are likely to prompt further targeted policy easing,” the firm said in a note.

Aberdeen said it remains positive on emerging markets bonds and equities, where growth continues to outperform pre-pandemic trends and benefits from AI-driven capital expenditure, particularly across emerging Asia. “While the recent energy shock may temporarily weigh on non-commodity exporters, structural tailwinds remain supportive, and many Latin American economies retain scope for further monetary easing. However, dispersion across the region is increasing, with performance concentrated in a narrow set of technology linked exporters,” the firm said.

Michaël Lok, group CIO and co-CEO Asset Management at Switzerland's Union Bancaire Privée (UBP), also said he is initiating a rotation towards broader, higher-quality exposures: emerging markets are at the heart of the global semiconductor supply chain. He sold his exposure to China given persistent structural headwinds and a lack of near term catalysts. With oil [price] steady and risks lessening, he has downgraded the energy sector and sees that there are more attractive prospects in utilities, which are benefiting from infrastructure investment tied to artificial intelligence. 

In their midyear outlook 2026, Stephen Dover and Larry Hatheway from the Franklin Templeton Institute preferred equity investments including information technology, US small-cap stocks, and financials, as well as emerging equity markets.

Other markets
Onuekwusi has a positive view on equities and government bonds, to which he has been adding recently. He believes that together they provide more efficient exposures than corporate bonds alone, where he is underweight. He has also recently added to inflation-linked bonds where he maintains a neutral stance.

"Within equities, our preference for markets outside the US remains unchanged. US equities continue to represent the most significant valuation risk, with high index concentration and stretched multiples implying more muted medium-term return potential and greater vulnerability to disappointment,” Onuekwusi continued.

“In contrast, UK, Europe ex UK and Japan offer a more attractive combination of valuations and improving fundamentals. We have made some recent additions to UK equity, which remains supported by its defensive composition and discounted valuations, while Europe ex UK benefits from a balanced sector mix and global revenue exposure,” he said. “Japan continues to stand out as a key opportunity, supported by corporate reform, fiscal support and strong profitability, with smaller and mid-sized companies offering additional diversification benefits.”

Lok has also tilted towards Europe, where easing energy costs and improving fundamentals are quietly strengthening the case for the region.

Within fixed income, Onuekwusi retains an overall neutral stance, while becoming more selective across credit segments. "Our fixed income positioning reflects a more cautious stance on credit relative to sovereigns. While yields across credit markets still look attractive on the surface, tighter spreads suggest that compensation for taking on additional credit risk has become less compelling, particularly against the backdrop of rising geopolitical uncertainty,” Onuekwusi said. “As a result, we have been trimming credit exposure and leaning more towards sovereign bonds. Higher government bond yields are starting to rebuild their role as a diversifier in portfolios, offering more resilience when volatility picks up, even if valuations are not outright cheap.”

Meanwhile, Dover and Hatheway favour US high-yield credit, select emerging market debt – especially in Latin America – and municipal bonds for US taxpayers.

On private credit, Aberdeen maintains a neutral stance, reflecting building late-cycle concerns. “Investment grade segments remain resilient and the yield pick-up over public markets is attractive,” the firm said. But there are emerging signs of stress in parts of the direct lending market, with concerns about underwriting standards, fund liquidity, and the potential for deterioration as the cycle matures.

Aberdeen also retains a strong positive view on infrastructure, underpinned by powerful structural drivers including digitalisation, decarbonisation and rising defence spending. “Significant global infrastructure investment needs are expected to create a sustained pipeline of opportunities, with private capital playing an increasingly important role,” the firm said. “While renewable energy continues to dominate deal volumes, digital infrastructure is capturing a growing share of total value, and valuations are generally most attractive in small and mid-market transactions.”

Dover and Hatheway believe that private markets, secondaries, private credit, real estate and infrastructure offer attractive opportunities to potentially boost returns while improving diversification through lower volatility. “Key risks for investors to watch in the second half of 2026 include geopolitical conflict, elevated inflation and the potential for surprise monetary policy tightening,” they said.