Key points
- BlackRock has returned to overweight on emerging market (EM) equities, having closed that position in June 2026 over leverage concerns in Korea.
- It expects earnings per share for the MSCI Emerging Markets index to grow by 34.2% over the next 12 months, versus 20.3% for the MSCI USA index.
- EM stocks trade at 10x forecast earnings against 19.9x for US stocks, a discount of about 50%.
- BlackRock links the EM call to its ‘AI scarcity’ theme, pointing to chip supply chains in South Korea and Taiwan and to resources in Latin America.
- It has also downgraded short-term European government bonds to neutral.
- Key risks flagged include renewed Middle East oil pressure and a possible test of the Federal Reserve's credibility.
Bottom line: BlackRock says exceptional emerging market earnings growth, valuations well below the US and easing Korean leverage concerns justify a return to overweight, even as it stays alert to risks from high oil prices and central bank decisions.
As of 14 September 2026, this view comes from four BlackRock Investment Institute strategists: Wei Li, global chief investment strategist; Beata Harasim, senior investment strategist; Michel Dilmanian, portfolio strategist; and Sam Vecht, portfolio manager for global emerging market equities.
Alongside the EM move, BlackRock maintains its overweight positions in US and artificial intelligence (AI) related equities and has downgraded short-term European government bonds to neutral. They write: "We remain pro-risk, but see little room for complacency."
The strategists add: "But this is not an unqualified bullish call. A lot can still go wrong, and we stand ready to shift from risk-on if the signposts change."
Global interest rates have risen sharply, oil prices have passed $100 a barrel and government bond yields sit near multi-decade highs. Even so, stock markets remain close to record levels. BlackRock thinks higher rates and strong equities can coexist and that reasoning now extends to emerging markets.
What has been happening in markets this week?
In the run-up to this commentary, published on 14 September 2026, Brent crude oil topped $100 a barrel, for the first time since July, after the US and Iran exchanged further attacks. New US inflation data pushed markets to raise their expectations of a Federal Reserve (Fed) interest rate rise. Long-term government bond yields remain near multi-decade highs, yet stock markets are still close to record highs. BlackRock puts that resilience down to rising US earnings expectations, which it says cushion equities against higher rates and energy costs and reinforce its overweight position in US stocks.
Why has BlackRock gone back to overweight on emerging market equities?
BlackRock closed its previous overweight on EM equities in its Midyear Outlook in June 2026, as leverage concerns built, particularly in Korea. Korean equities then fell in value, and BlackRock says summer deleveraging (paying down borrowed money) has since eased those concerns, clearing the way for a return to overweight.
Earnings are the main reason. As of September 2026, BlackRock Investment Institute data, drawn from LSEG Datastream, shows earnings per share for the MSCI Emerging Markets index are expected to grow by 34.2% over the next 12 months, more than the 20.3% expected for the MSCI USA index.
Despite that stronger growth, EM stocks trade at only 10x forecast earnings (the forward price-to-earnings ratio, or P/E, a measure of how expensive a share is relative to its expected profit), against 19.9x for US stocks. That is roughly a 50% discount and puts the EM multiple in the cheapest 10% of its 20-year range.
BlackRock says: "The fundamental case has strengthened: earnings growth is exceptional even as valuations remain well below those in the US."
How does BlackRock's "AI scarcity" theme fit into the emerging markets call?
BlackRock frames the EM move as another way to invest in what it calls its "AI scarcity" theme: the idea that the buildout of AI infrastructure is competing for limited capital, power and other resources. It is the theme behind BlackRock's existing overweight positions in US and AI-related equities too.
Within EM, BlackRock highlights South Korea and Taiwan, which sit at the centre of global semiconductor, memory and hardware supply chains, and Latin America, including Brazil, which offers exposure to the resources and infrastructure the AI buildout needs. BlackRock says this overlap "is deliberate" and concentrates some of its equity exposure to AI.
It flags a caveat too: cheaper AI models and wider commoditisation could eventually shift where AI profits land, so it prefers to "stay selective and dynamic rather than assume today's winners will remain tomorrow's".
Does a weaker US dollar matter to the call?
A weaker dollar could help further, by easing financial conditions, supporting emerging market currencies and drawing in foreign capital. But BlackRock says the EM overweight does not depend on this: "We see dollar weakness and stronger inflows as additional support rather than the foundation of our EM call."
What could change this view?
BlackRock names two risks that could challenge its pro-risk stance. First, although markets have absorbed the recent Middle East shock reasonably well, shipping traffic through the Strait of Hormuz remains severely constrained and the resulting scarcity has moved downstream into refined products (fuels processed from crude oil, such as petrol and diesel). Renewed pressure on energy prices could keep inflation elevated just as the Fed faces a difficult decision on rates.
Second, BlackRock says a Fed decision to hold rates despite persistent inflation and a tight labour market could test the central bank's credibility. In that scenario, it expects the term premium (the extra yield investors demand for holding longer-dated bonds) to act as a "release valve," pushing long-term bond yields higher and raising the bar for equity returns. BlackRock says it "stands ready to adjust as conditions change".
What to watch next
BlackRock flags a run of central bank decisions in the days after this commentary was published on 14 September 2026: the Fed's rate decision and UK inflation (CPI) data on 16 September; the Bank of England's (BoE) rate decision on 17 September; and the Bank of Japan's (BoJ) rate decision and Japan's core inflation data on 18 September.
BlackRock says strong jobs figures and persistent inflation have raised market expectations of a Fed rate rise, "though we don't see one as a foregone conclusion". It expects the BoE to hold and thinks the BoJ may need to tighten policy faster than expected.