Goldman Sachs: Buy stocks in these 15 emerging market countries that are set to outperform the US as earnings weaken in 2023

• Stocks in the US and emerging markets struggled in 2022 as global growth slowed. 
• Goldman Sachs is more optimistic about emerging markets than US names in 2023.
• Here are the 15 best opportunities in developing markets for investors, according to the firm.

US stocks just had their worst year since 2008, and many market strategists don’t see big gains in 2023 with corporate earnings set to fall under heavy pressure as the economy slows.

The difficult backdrop is causing some investors to consider equities in emerging markets. While the group lost 22.4% in 2022, as measured by the iShares MSCI Emerging Markets ETF (EEM), Goldman Sachs is optimistic that a rebound for stocks in developing countries is coming.

Stocks in emerging markets are expected to return 11% in the next 12 months in their local currencies or 17% when converted to US dollars, according to Goldman Sachs. The bull case for emerging markets is that smaller economies may still achieve growth in a global recession — especially if China gets past COVID-19 — as the dollar slides and reduces import costs.

Meanwhile, US stocks, as measured by the S&P 500, are expected to fetch between 4% and 6% next year. But if US companies can’t grow earnings by 6%, as Goldman Sachs predicts, then the S&P 500 could be in for another rough year, given that valuations are still stretched.

15 top emerging markets in 2023

Caesar Maasry, the head of emerging markets cross-asset strategy at Goldman Sachs, listed expected 12-month returns for stocks in 23 different emerging markets countries. Stocks in 15 of those developing countries are seen as outperforming the US in that span, according to the firm.

Below are the 15 EM countries that will offer the best investing opportunities in the next year, according to a January 2 note from Maasry and his colleague at Goldman Sachs, Jolene Zhong. Each country is listed in alphabetical order along with its index, an exchange-traded fund (ETF) that tracks it, and expected earnings growth and total returns by currency in the next 12 months.