Emerging-market stocks will make up a bigger share of the global landscape than the US by next decade Goldman says

CEO Ma Heping (L) and co-chairman Wu Zhixiang of Tongcheng-Elong Holding Limited ring the bell during the company's listing ceremony at the Hong Kong Stock Exchange (HKEX) on November 26, 2018 in Hong Kong, China.

Tan Daming/China News Service/VCG via Getty Images

• Emerging-market stocks will catch up to US stocks in global market share by 2030, Goldman Sachs estimated.
• That's due to faster growth in EM markets, which is largely led by China, economists said in a note.
• China could replace the US as the world's largest economy by 2035, the bank added.

Emerging-market stocks will take up a bigger share of the global stock market than the US by the next decade, according to estimates from Goldman Sachs.

The bank's economists predicted that emerging markets, which include nations like China and India, would make up 35% of the global stock market capitalization by 2030, 47% by 2050, and 55% of by 2075.

Meanwhile, US stocks will make up 35% of global market cap in 2030, 27% in 2050, and just 22% by 2075.

Currently, the US accounts for 42% of the global market, while emerging markets account for 27%.

That doesn't necessarily translate to better stock performance in itself, though the bank generally expects emerging-market stocks to outperform developed-market stocks over the long-term, economists said in a note on Thursday.

The shift will largely be driven by faster income growth in emerging countries, which will lead emerging economies to catch up and eventually oust the US in market share. That boom will largely be led by China, economists predicted, whose economy is expected to replace the US as the world's largest economy by 2035. 

But that trajectory could be jeopardized by growing protectionism in emerging market nations, economists said, referring to policies such as those in China, which has cracked down on foreign firms operating in the country due to its new anti-espionage laws. Chinese officials have also suggested the nation could retaliate specifically against American firms, if its own companies continue to face harsh treatment in the US.

"We view [protectionism] as the more important risk to the growth of capital markets — specifically, the risk that populist nationalism leads to increased protectionism and a reversal of globalization," economists added.

The rapid growth of emerging markets could also be compromised by the boom in artificial intelligence, which has largely taken place in developed markets like the US. The strong performance of US stocks this year is largely attributed to the AI hype, which have caused some mega-cap tech names to post sky-high gains.

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