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Emerging markets have been outperforming the U.S. stock market as commodity strength and a weaker dollar drive capital flows.
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MELI, DLO, and NU offer exposure to Latin America’s growth through e-commerce, payments, and digital banking.
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Long-term tailwinds remain despite potential short-term volatility in commodities and the dollar.
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While U.S. equities have struggled to gain meaningful traction this year, several emerging markets have delivered strong outperformance. A large part of that strength has come from renewed interest in commodities and non-dollar assets. Buying commodities, from gold to industrial metals, often acts as a short on the dollar, and that dynamic has increasingly benefited emerging markets.
The performance gap tells the story. As of the Jan. 29 close, the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM) was up 10.5% year-to-date (YTD), compared to just a 1.8% gain for the SPDR S&P 500 ETF Trust (NYSEARCA: SPY). In South Africa, currency strength has further amplified returns. The South African rand has gained nearly 25% against the U.S. dollar over the past year, helping push the iShares MSCI South Africa ETF (NYSEARCA: EZA) up almost 15% YTD and more than 84% over the past 12 months.
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While a near-term pullback in commodities could support the dollar and lead to some digestion across emerging markets, the broader trend appears intact. For investors looking to diversify outside the U.S. and gain exposure to faster-growing economies, South America stands out. Here are three emerging market stocks with compelling long-term narratives.
MercadoLibre (NASDAQ: MELI) is the dominant e-commerce and fintech platform in Latin America, with a market capitalization of nearly $112 billion and membership in the Nasdaq-100. The company operates in e-commerce, logistics, digital payments, and consumer credit, creating a deeply integrated ecosystem across the region.
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MELI carries a Moderate Buy consensus rating, with an average price target near $2,877, implying roughly 30% upside from current levels. Investors will be watching the company’s Q4 earnings report on Feb. 19 closely, especially after it missed earnings per share (EPS) estimates in Q3 due to higher investment spending and macroeconomic pressures in Argentina.
Despite near-term margin compression, MELI continues to scale aggressively. In Q3, the company added 7.8 million new unique buyers, bringing its total user base to 77 million.