Morgan Stanley says emerging markets are making a comeback that will endure for the next decade – and outlines 3 ways to smartly invest your money in them

• EMs can continue to rally amid a digital revolution, higher commodity prices, and economic reform.
• Morgan Stanley found that an ideal global equity portfolio allocates at least 13% to EMs.
• The bank shared 3 allocation strategies to further help determine optimal emerging-market exposure. 

Times are changing; and because of that, this might be a good year for emerging markets. 

The asset class that’s historically underperformed the US was up even more than the S&P 500 in 2020, with the MSCI Emerging Markets Index that tracks underdeveloped nations returning about 18.31% compared to 16.26% for the S&P 500 Index. 

The resilience that emerging markets showed through last year’s bumpy road suggests a bright outlook for the coming years, Morgan Stanley says. More specifically, positive manufacturing stories, the revival of commodity prices, the digital revolution, and modified reforms that can propel economic growth, are most likely to be the driving forces behind the lengthy rally.