iShares Core MSCI Emerging Markets ETF

IEMG

Market cap $111B

Wall Street warns of an AI equity bubble as mega-cap tech surges, prompting investors to diversify into ETFs for balanced growth.

Investors can eye global equity funds as AI bubble fears, U.S. market risks and Fed easing fuel demand for international diversification.

The iShares Core MSCI Emerging Markets ETF invests in small-, mid-, and large-cap emerging market companies, primarily in China, India, Taiwan, and South Korea. After lackluster returns in the prior decade, IEMG is outperforming the S&P 500 so far this year, benefiting from a surge in dividend distributions. This has resulted in the ETF offering a current dividend yield of 2.80% - little changed from my prior coverage in July 2024.

Emerging markets investing has had an overall positive year in 2025. Entering the year, with many U.S. investors underweight foreign equities, some market watchers anticipated big opportunities abroad.

Getting emerging market exposure is a viable option in the current market environment. That's especially so given the global de-dollarization and prospect of further rate cuts by the Federal Reserve.

Amid AI bubble worries and tech sell-offs, investors turn to value, consumer staples, gold and international ETFs for diversification.

When it comes to equities exposure, U.S. large-caps continue to garner the lion's share of capital allocations. However, emerging markets (EM) could finally be in the throes of a comeback.

IEMG is outperforming the S&P 500 YTD, with a 21% return versus 8%, and I reiterate my buy rating. The ETF offers broad, low-cost emerging market exposure, attractive valuation at 13.7x earnings, and a solid 3%+ dividend yield. Technical momentum is strong, with a recent breakout above $59 and a bullish trend targeting $70 in 2025.

ETFs pulled in $24.1B last week, led by VOO, SPLG, IBIT, IEMG and XLF, as investors poured into equities, Bitcoin and emerging markets.

Emerging markets are drawing billions in fresh inflows as U.S. debt fears, tariffs and inflation shake investor confidence.