Over the past decade, growth in emerging markets has in fact outpaced growth in developed markets by more than double. Growth in gross domestic product (GDP) looks like it will continue to outperform that of developed markets for at least the
next five years, according to estimates by the International Monetary Fund.
We are often asked why Economic growth and stock market performance don’t always directly correlate in a given year, and if that’s the case, does a nation’s GDP growth matter at all when it comes to investing in companies? While it’s true that growth and stock market performance can be divergent at times, there is no question that growth matters since company earnings depend on general economic growth.
If you carefully analyze the breakdown of growth in emerging versus developed markets, you can see emerging markets have grown faster than developed markets for many years. In general, strong growth rates are regarded as a key characteristic of
emerging markets. In the past 20 years, there was only one year, 1998, when growth in emerging markets lagged developed markets.