Navigating Investing in Today's Markets with Derrick Irwin
Derrick Irwin shares his favorable outlook for emerging markets in 2026, driven by strong economic fundamentals, accelerating earnings growth, and reduced investment risk.
Transcript
Cameron Pickoski: We're here in Fort Lauderdale this week at our National Sales Summit, where the theme is “Charting the Course.” So, Derrick, we wanted to talk to you a little bit about how you and your team are navigating investing in today's market. Specifically, recently you've mentioned that it's an exciting time for emerging markets. Can you tell us a little bit about what key factors are driving that view?
Derrick Irwin: It is an exciting time for emerging markets. 2025 was an excellent year for emerging markets. They were up over 30%—one of the best years in a very long time, and we think that can continue. We think there's really three factors that will drive emerging markets up in 2026. The first is a lot of the drivers from 2025 remain in place. We see a softer dollar—that will likely continue. We see continued positive surprises around economic growth and declining inflation in emerging markets. And that really puts us in that sort of economic “Goldilocks” zone. And then finally, we're beginning to see significant inflows into the asset class. 2025 saw about $31 billion of assets flowing into emerging markets, and we've seen that accelerate into January and into February. So, we think investors are really getting excited about emerging markets, and that can give some support to the markets. But, more importantly, when we look from a bottom-up standpoint at the companies, we think that's going to be a bigger driver for emerging markets as we go forward. Earnings growth is accelerating in emerging markets. In 2026, we expect that to accelerate closer to 18%—so, really a significant bump up in earnings growth for emerging markets. More importantly, we're seeing return on capital really improve and the spread between return on capital and cost of capital widening. That's very important for support for emerging markets. So, we're very excited. And then the final thing that I think is really important in a message that we've been talking to investors about is the change in risk in emerging markets. A lot of people are reevaluating the investment case for emerging markets, and what they'll find is emerging markets, relatively speaking, have become less risky over the last 10 years or so. And we think asset allocators will take that into account as they examine their emerging market allocations.
Key takeaways
- In 2026, emerging markets could benefit from a softer dollar, potential economic growth surprises, and moderating inflation.
- Earnings growth in emerging markets is projected to improve this year, potentially up to 18%, alongside improving return on capital.
- The team has seen a change in risk in emerging markets over the past decade, that has been prompting investors to reevaluate and increase their EM allocations.
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