No Mercy / No Malice: 2025 Predictions

Investment Trends

Investment opportunities in emerging markets are becoming increasingly attractive as the US stock market reaches high valuations. George Hahn highlights that historically, when US equities decline, emerging markets tend to rise, suggesting a potential shift in capital flows 1. He notes that the US stock market now constitutes 50% of the global market cap, indicating that returns may diminish and investors might seek better opportunities elsewhere.

The S&P 500 outperformed Vanguard's All World EX US Index ETF, plus 56% to plus 23% respectively from 2023 through 2024. Historically, when US equities fall, emerging markets rise.

--- George Hahn

This trend is supported by the fact that emerging markets have historically outperformed developed markets by 27% following a Fed rate cut 1.

   

Demographic Impact

Demographic shifts are playing a crucial role in shaping economic trends in emerging markets. George Hahn points out that the growth in working-age populations in countries like India and Indonesia is a significant factor driving these markets 1. This demographic advantage positions these nations to attract substantial institutional capital, which is currently at a cyclical low.

The growth in working age populations favors India, Indonesia and other developing nations.

--- George Hahn

A reversion to the mean could lead to an influx of $910 billion into these markets, further enhancing their economic prospects 1.