Key Takeaways
- • Phil Langham, managing director and head of emerging markets equities at RBC Global Asset Management, forecasts a structural "sea change" in emerging markets driven by a shift from export-led growth to domestic demand-driven expansion.
- • Emerging markets earnings growth has accelerated to 15-20% over the past two years, with momentum currently outpacing all other global regions, supported by a favorable cycle driven by earnings expansion and U.S. dollar weakness.
- • Historical EM performance cycles span 8-12 years and are primarily propelled by two drivers: earnings growth and U.S. dollar valuation, with EMs historically performing better during periods of dollar weakness tied to U.S. fiscal deficits.
- • Structural tailwinds supporting the shift toward domestic demand in emerging markets include changing demographics, rising wages, urbanization, technology adoption (particularly artificial intelligence), and significant changes in trade patterns.
- • The speaker emphasized that institutional investors should assess emerging markets through long-term performance cycles rather than short-term volatility, noting a historical dependency on developed market growth that is shifting materially.
Summary
Phil Langham, managing director, senior portfolio manager, and head of emerging markets equities at RBC Global Asset Management, outlined a transformational outlook for emerging markets at the Canadian Investment Review's 2026 Global Investment Conference, arguing that institutional investors must view EM performance through the lens of historical 8-12 year cycles rather than shorter timeframes.
Langham identified two primary drivers of EM cycle performance: earnings growth and U.S. dollar valuation dynamics. He referenced the 2010 period as an instructive example, when massive capital inflows to emerging markets created over-capacity and over-investment, subsequently depressing margins and earnings growth for an extended period. Notably, the current cycle shows materially different characteristics: emerging markets have delivered 15-20% earnings growth over the past two years, with earnings momentum currently exceeding all other global regions. The U.S. dollar's valuation trajectory significantly influences EM returns, as these economies perform substantially better in weaker dollar environments. Dollar movements are influenced by both fundamental valuations and U.S. fiscal policy dynamics, including deficits and related policy decisions.
Looking forward, Langham expects a "sea change" in the structural drivers of emerging market growth. Historically, emerging markets have relied heavily on developed market demand, with growth primarily export-driven. This dependency is shifting toward domestic demand-driven expansion, supported by multiple structural factors: changing demographic profiles, rising wage growth, rapid urbanization, and technology adoption—particularly artificial intelligence. Langham also highlighted significant shifts in global trade patterns as a critical structural catalyst. This transition from external-demand-dependent to domestic-growth-driven economies represents a fundamental repricing of emerging market risk and opportunity profiles for institutional allocators.
Langham identified two primary drivers of EM cycle performance: earnings growth and U.S. dollar valuation dynamics. He referenced the 2010 period as an instructive example, when massive capital inflows to emerging markets created over-capacity and over-investment, subsequently depressing margins and earnings growth for an extended period. Notably, the current cycle shows materially different characteristics: emerging markets have delivered 15-20% earnings growth over the past two years, with earnings momentum currently exceeding all other global regions. The U.S. dollar's valuation trajectory significantly influences EM returns, as these economies perform substantially better in weaker dollar environments. Dollar movements are influenced by both fundamental valuations and U.S. fiscal policy dynamics, including deficits and related policy decisions.
Looking forward, Langham expects a "sea change" in the structural drivers of emerging market growth. Historically, emerging markets have relied heavily on developed market demand, with growth primarily export-driven. This dependency is shifting toward domestic demand-driven expansion, supported by multiple structural factors: changing demographic profiles, rising wage growth, rapid urbanization, and technology adoption—particularly artificial intelligence. Langham also highlighted significant shifts in global trade patterns as a critical structural catalyst. This transition from external-demand-dependent to domestic-growth-driven economies represents a fundamental repricing of emerging market risk and opportunity profiles for institutional allocators.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.