Wall Street maintains its optimistic outlook for emerging markets in 2026.

Major Wall Street banks are poised for another strong showing in emerging markets, anticipating further momentum from a weaker dollar and a surge in investment in artificial intelligence. These positive factors are expected to drive further gains in emerging markets, with local currency bonds delivering a 7% return – the best performance since 2020 – and currency indices rising by over 6%. Morgan Stanley strategists point out that the Federal Reserve may further cut interest rates as the US economy slows, which will support the market rally. The bank recommends clients maintain long positions in emerging market local currency bonds, projecting returns of around 8% by mid-2026. For emerging market dollar bonds, they forecast "high single-digit" gains over the next 12 months.