- EM share of equity capital will match the US by 2030
- US stock markets have dominated for decades
- India projected to enjoy the largest growth, says Goldman
Goldman Sachs is telling clients to back emerging markets as it bets big on stock markets in places like India and China playing catch-up with the US.
The US investment bank projects that by 2030 emerging markets capitalisation will balloon to tie with the US at around a 35% share of the overall global market. As Shares explained on 28 December, the US share of global market capital stood at 42.5% in 2023, by far the most dominant.
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The next five or so years will see this balance change dramatically, if Goldman is right, as China, India and elsewhere grab an increasingly large slice of the world’s capital investment.
Goldman thinks the shift in the balance of capital power will continue beyond 2030, seeing combined emerging markets overtaking the US to become the world’s largest region for global capital investment. By 2050, the emerging markets share is anticipated to rise to 47% of global stock markets.
WHY CAPITAL MARKETS POWER IS SHIFTING
Goldman gives several reasons for why this rebalancing of stock market scale is happening but the main one underscoring this shift is the rapid growth projected for emerging economies. Historically, as GDP per capita grows, capital markets in an economy become more sophisticated.
We can see this in richer countries, which tend to have higher level of equity in their markets.
Goldman data shows that India is projected to rise the fastest globally. By 2030, it is projected to account for 4.1% of global equity market cap. Furthermore, by 2050, this share is projected to outrank the euro area due to strong GDP per capita growth and demographic drivers.
| How Goldman Sachs sees global equity market share shifting |
| Country / Region | Global equity market share 2030 | Global equity market share 2050 |
| US | 24.7% | 26.9% |
| Euro area | 8.3% | 7.9% |
| China | 14.1% | 15.0% |
| India | 4.1% | 8.3% |
| Rest of developed markets | 21.5% | 17.8% |
| Rest of emerging markets | 17.4% | 24.1% |
| Source: Goldman Sachs |
The second factor, although to a lesser extent, is emerging market rising valuation multiples driven by higher GDP per capita. Richer countries, as seen in the US, often trade at higher earnings multiples because they are viewed to have lower risk.
IMPLICATIONS FOR INVESTORS
This could have significant implications for today’s investors. While the US has outperformed in recent decades, it may not mean it will continue this trend, according to Goldman Sachs.
Given the structural shifts stemming from growing populations and GDP growth, investors may consider diversifying their portfolios geographically looking ahead, the investment bank’s analysts say.
