The Geneva-based asset and wealth manager explains why it believes that emerging markets are well positioned to continue outperforming developed markets. Lombard Odier has an overweight exposure to this asset class.

Emerging markets are well placed to continue outpacing their developed counterparts, and the depreciation of the US dollar provides some of the impetus, argues Swiss private bank Lombard Odier.

The outlook for emerging markets has stabilised in response to clearer US trade arrangements and persistent greenback weakness. The bank's chief investment office expects to resume. While US tariffs may weigh more on economies in the next few months, solid earnings growth and a gradual rebound beginning in the last quarter of 2025 should come through, the lender said.

The dollar’s loss of momentum this year has provided a relief for many key emerging markets. Interest rate differentials, fiscal dynamics, and trust in institutional quality assets are all shifting in response to recent US policies. Lower valuations for emerging market equities compared with developed markets makes them attractive while in fixed income, higher-than-average yields favour emerging market hard currency bonds.

As the summer vacation period comes towards a close and thought turn to what the final quarter of 2025 may hold, there's been a sense that the US tariff policy, dollar decline and continued shift in the economic centre of gravity to Asia are encouraging asset allocators to redeploy some of their wealth. The Lombard Odier commentary came out last week ahead of the weekend's comments on monetary policy by US Federal Reserve chairman Jerome Powell. The chair struck what some commentators saw as a dovish note on US interest rates, implying a cut when rate-setters next meet in September.

On the rise
Lombard Odier noted that emerging market equities are rebounding, supported by clearer US trade policy, persistent US dollar weakness, and earnings growth expectations. US tariffs have been selectively applied, leaving many emerging markets relatively better off than developed economies such as Europe or Japan. Investor sentiment is improving, driven by lower US interest rate expectations, falling hedging costs, and political shifts towards more market-friendly policies

Emerging market assets offer attractive valuations and yields, Lombard Odier said. It keeps an overweight exposure to emerging market equities, while increasing its allocation to emerging market hard currency bonds, anticipating continued outperformance into 2026.

“While US tariffs may weigh more on economies in the next few months, we see solid earnings growth and a gradual rebound beginning in the last quarter of 2025,” the firm said in a note. “Lower valuations for emerging market equities compared with developed markets makes them attractive while in fixed income, higher-than-average yields favour emerging market hard currency bonds.”

Lombard Odier sees a good chance that the 24 constituents of the MSCI emerging market index will continue to outperform developed markets in 2026.

The firm is not alone in its views. Anna Mulholland, head of research and management of emerging market equities at Pictet Asset Management, also believes that emerging market equities remain undervalued compared with developed markets. With growth in emerging market economies accelerating and the dollar weakening, Mulholland believes that emerging markets are poised to benefit as investors diversify out of US assets.

Richard Tang, China strategist and head of research Hong Kong at Julius Baer, also maintains an overweight stance on China’s market, whose bottom-up narrative has improved despite top-down macro challenges. See here and here.