Emerging-market stocks, currencies and precious metals are extending a storming start to 2026 as tensions between the US and Europe weigh on the dollar. The rally gathered pace Friday, with the MSCI Emerging Markets Index heading for a fifth successive week of gains, its longest winning streak since May.
Bloomberg reports:
Investors are pouring cash into emerging-market funds at a record pace as momentum builds for a rotation out of US holdings. It’s sent the EM stocks gauge to a record high.
While Asian technology shares drive the rally, other regions are also catching up. The benchmark for Emerging Europe, Middle East and Africa has risen on all five days of this week and is on course for its best month since 2020. The MSCI EM Latin America Index of equities on Thursday closed its highest since April 2018.
The Greenland tussle — even if it has been mitigated for now — has revived questions about US exceptionalism and the role of the dollar, spurring funds from Europe to India to diversify away from Treasuries. The flow has added an impetus to an EM rally fueled by robust global growth, the AI spending boom and political shifts in Latin America, as well as fiscal and monetary policy orthodoxy in much of the developing world.
People “are looking to diversify away from US assets, and I would kind of describe it as quiet-quitting of US bonds,” TCW Group Inc. Chief Executive Officer Katie Koch said in a Bloomberg Television interview. “I don’t think there’s going to be a massive announcement, I just think they’re going to look for opportunities to diversify away.”