Developed markets will outperform in 2025, says JPMorgan Private Bank, but these emerging economies promise solid returns

Going into 2025, JPMorgan Private Bank sees increased volatility in fixed income markets and a rebound in deal making.

JPMorgan Private Bank believes 2025 will see developed markets outperform EM equities, however, regions like India, Taiwan, Indonesia and Mexico could deliver solid returns for investors.

While the EM economies have seen strong economic growth, on an average growing the nominal GDP by 4.3% in local currency since 2009 compared to 1.7% by developed market peers, the local equity index returns have lagged in many markets, JPM Bank said in a note prepared by its Global Investment Strategy Group.

"While economic growth has been strong across a number of countries, many domestic companies have not seen their profits grow. One of the most glaring examples is China, where earnings have been flat over the past 10 years despite strong economic growth," it said.

Within the EM pack, JPM Private Bank's note lays down a combination of three factors that forms its framework for investing, namely, a large private sector, economies where companies generate higher EPS returns, and nations with strong and growing export industries. The note highlights that India has delivered highest earnings growth of 296% in local currency terms, between September 2009 and 2024.

India counted among nations where companies create shareholder value, along with Brazil, Indonesia, Taiwan and the United Arab Emirates, generating returns either through profit or dividend growth. The note added that companies in these nations tend not to dilute shareholder value.

On export growth, China is a clear standout, supported by government stimulus and subsidies, but such a scenario may not be ideal for profit margins and earnings growth, it added. Nonetheless, economies such as Vietnam, India, Taiwan, Poland and Turkey have all been able to gain their export market share.

"In our three-factor framework, India, Indonesia, Taiwan and Mexico stand out as the most promising hunting grounds for equity investors. The EM Index may disappoint. But investors who pick their spots, and their stocks, have the potential to realize attractive returns," the JPMorgan Private Bank note added.

Going into 2025, JPMorgan Private Bank sees increased volatility in fixed income markets and a rebound in deal making.

In its recently shared note, JPM forecasted that the coming year will see:
-policy rate normalise
-spend on AI and infrastructure to continue
-more US deregulation in some sectors and trade tariffs may rise
-the need to hold real assets in portfolio
-an evolving investment landscape

JPMorgan advised investors to consider maintaining 'balanced positioning between offense and defense, stocks and bonds', with private equity poised to benefit from growing investment and
dealmaking, while infrastructure, real estate and other real assets could 'insulate' against geopolitical and inflation risks. "We believe investors should consider keeping some capital available to potentially take advantage of opportunities that may arise," it added.

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