US indices have been setting records for several weeks now. Yesterday, the S&P 500 recorded its 32nd record close in 2025. These records should not make us forget that Wall Street is no longer the leader this year.
US indices are notably outperformed by emerging markets. The MSCI Emerging Markets Index, which tracks 1,189 stocks from 24 emerging markets, is up 27.5% since January 1, while the S&P 500 has risen "only" 15%.
Over five years, however, it's undisputed: the S&P 500 has outperformed the MSCI Emerging Markets Index by a factor of approximately four. Over this period, emerging markets have been particularly penalized by the "uninvestable" nature of China.
Source: MarketScreener
One of the arguments often heard to explain this return of emerging markets is the desire to diversify away from the US, a market considered too concentrated.
Indeed, the top 10 stocks in the S&P 500 account for around 40% of the index and have been responsible for most of its performance for several years now.
But the MSCI Emerging Markets index is not immune to this problem: the top five weightings in the index alone account for almost 25% of the index.
Top 10 weightings in the MSCI Emerging Markets Index. Source: MSCI
And it is these stocks that are driving the index. Since January 1, TSMC has risen 30%, Tencent 62%, Samsung 67%, Alibaba 96%, and SK Hynix 127%.
While there is a real desire to diversify away from the US market and catch up, the rise of emerging markets is also following in the wake of Wall Street, thanks to the surge in a few stocks linked to the same theme that is boosting the Nasdaq and the S&P 500: artificial intelligence.
