Each quarter, we share videos on investment topics to help you better understand how we manage portfolios. This quarter, we start with an update on recent portfolio allocation moves, then discuss the broader forces shaping global markets.
At the start of the year, we were undertaking some significant rebalancing in client portfolios, which, while varying from client to client, often involves trimming large-cap U.S. stock holdings that continue to outperform. In most portfolio strategies, we are also adding an allocation to international emerging market stocks.
For our portfolio spotlight this quarter, we’re looking at why we are adding emerging market stocks to most Boulay Wealth portfolio strategies.
For over 10 years, large-cap U.S. stocks have outperformed most international stock markets, including those of the emerging markets. To be diversified, our portfolio strategies have always kept a broad international stock allocation, but global developments have prompted us to allocate more specifically to emerging market stocks.
What constitutes an emerging market economy depends on who’s doing the tracking. MSCI, a creator of stock market indices, includes 24 countries in its emerging market index, but the stocks from China, India, Brazil, Taiwan, and South Korea account for over 80% of that index. While China is the largest emerging market economy, we feel that China’s government interference in businesses and the lack of transparency in the economic data make investing there a risk that we seek to minimize. We are not alone with our concerns, as there is a growing trend to shift manufacturing from China to other emerging market economies, such as Vietnam, Indonesia, and Mexico.
Excluding China did not hinder our emerging market strategy in 2025, as it outperformed the S&P 500 index by 15%. While we do not expect to see that level of outperformance going forward, we do believe that emerging market stocks can continue to perform well for several reasons.
One reason has to do with the performance of the U.S. dollar. For U.S. investors, investing in U.S. stocks has been more attractive than international investments for the better part of 15 years, due to, in part, because of the consistent strengthening of the U.S. dollar against most global currencies. That trend reversed in 2025, though, due to the waning desire of international investors to hold U.S. dollars. And a weakening or stable dollar improves international investment returns for U.S. investors.
The boom in commodity prices has also benefited emerging market economies greatly. The global technology explosion requires raw materials such as copper, nickel, silver, and rare earth minerals to make our electronic tools and digital infrastructure. Nearly 40% of copper comes from Peru and Chile. Indonesia and the Democratic Republic of Congo are key suppliers of nickel and cobalt. And Mexico is the world’s biggest producer of silver.
While exporting raw materials is still a big part of many emerging market economies, some of the world’s largest technology companies are headquartered in the emerging economies of Taiwan and South Korea. Taiwan produces 90% of the world’s advanced computer chips, and South Korea produces approximately 50% of the solid-state memory drives. When you include India’s growing technology centers, the emerging market economies really are starting to look like growth engines of the future that they have been predicted to be for the better part of a couple decades.
So there you have our take on emerging markets in 2026. If you have questions about the role emerging market investments play in your portfolio strategy, reach out to your Boulay financial advisor. If you’re not a Boulay client but are interested in what we can do for you, email us at learnmore@boulaygroup.com or contact us via the button below.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein. This is meant to be a reference/guide, individual circumstances can influence outcome, verify planning with accounting and financial professionals.
This information provided has been derived from sources believed to be reliable but is not guaranteed as to accuracy and does not purport to be complete analysis of the material discussed, nor does it constitute an offer or a solicitation of any offer to buy any securities, products or services mentioned. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Consult your financial professional before making any investment decision.
Indices are unmanaged and do not incur fees, one cannot directly invest in an index. Past performance does not guarantee future results. These opinions are based on our own observations and third-party research and are not intended to predict or depict performance of any investment. These views are as of the open of business on February 27, 2026, and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Diversification cannot guarantee a profit or protect against a loss. All investing involves risk, including the possible loss of principal. Indices are unmanaged and do not incur fees, one cannot directly invest in an index.