Emerging-market stocks got a lift on October 16, 2026, and the push came from an unlikely source: the chair of the Federal Reserve.
The MSCI EM Index rose 1% after Fed Chairman Kevin Warsh offered upbeat remarks about artificial intelligence at the IMF and World Bank annual meetings in Bangkok.
Warsh described AI as the most consequential change to the US and global economy in his lifetime.
He didn’t frame it as all upside, though. Warsh warned that an AI investment boom could bring potentially severe inflationary pressure in the short term. Over the longer run, he projected productivity improvements that could substantially benefit both the US economy and global markets.
What Warsh skipped was any guidance on upcoming rate decisions. He reiterated the Fed’s commitment to price stability and stressed the importance of institutional credibility.
The Fed raised its target rate by 25 basis points on September 16, bringing it to a range of 3.75%-4.00%. Inflation data showed prices rising 0.6% month over month in September.
A bounce after a bruising September
September was not kind to emerging markets. Net capital outflows reached $26.3 billion for the month, with foreign investors pulling $19.2 billion from EM equities and $7 billion from bonds.
That marked the first net outflow from EM stocks and bonds since June.
Not every market joined the party. Indonesian stocks fell steeply after MSCI said it was considering a potential reclassification of the country out of its emerging-market status.
Why AI and emerging markets are tied together
Taiwan and South Korea have both reported earnings boosts from AI-related investment in their tech and semiconductor sectors.
Capital inflows into EM investments reportedly peaked on the back of that strong AI-driven spending.
Emerging-market stocks trade at around 10 times forward earnings, compared with nearly 20 times for US equities.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.