Stocks in Emerging Markets Are Crushing the S&P 500. Should You Invest?

Core Viewpoint - Emerging market stocks outperformed other asset classes in September, with a notable rise of 6.6% as measured by the FTSE Emerging Markets All Cap China A Inclusion Index, surpassing U.S. stocks and the Nasdaq 100 [1][2][4] Group 1: Performance Overview - All major asset classes posted gains in September, with emerging market stocks leading the way [1] - The Vanguard FTSE Emerging Markets ETF rose 5.7% in September and is up 24% year-to-date [2] - The ETF holds approximately 6,000 stocks from over 20 emerging economies, with Chinese stocks making up about 29% of the fund [3] Group 2: Driving Factors - A weaker dollar is a significant factor contributing to the rise in emerging market stocks, with the dollar down nearly 10% year-to-date, marking 2025 as its worst year since 1973 [4][8] - The Federal Reserve's shift to a rate-cutting cycle is expected to further weaken the dollar [5] - Improved economic performance in many emerging markets, supported by structural changes, has led to a revised growth outlook from the International Monetary Fund, increasing from 3.7% to 4.1% [9]