Investor Presentation: 2026 Mid-Year Outlook – Higher targets but macro uncertainty remains

Research evidence excerpt

Investor Presentation: 2026 Mid-Year Outlook – Higher targets but macro uncertainty remains

FoundationM

Higher Targets at Mid-Year – Still Seeking a Robust Approach for an Uncertain World

• We raise our base case EM and TOPIX targets moderately to reflect another 6 months of earnings growth, while holding

our multiple assumption unchanged. We expect 40% EPS growth for MSCI EM in 2026 dropping to 9% in 2027, which is

moderately below consensus. Current consensus estimates revisions in EM are being driven largely by IT & Energy.

• Our new Base Case targets (now for Jun-27) stand at 4,300 for TOPIX (+12%) and for 1,800 for MSCI EM (+5%). We would

therefore moderately prefer Japan in aggregate and would invest FX-unhedged.

• That said, we view the current environment as exceptionally uncertain due to the combined effect of the global energy

shock and impact of AI capex and disruption. We continue to set unusually wide bear to bull target price spreads.

• Overall our focus lists are geared to core MS research themes and are centered on a preference for Goods over Services

and concentrated in Energy, Materials, Industrials and Semis / Memory. We are negative on Autos, Consumer & IT services

including E-commerce, and downstream industries impacted by higher commodity prices.

• Japan has broader estimate revisions than EM with multiple sectors/stocks exposed to core MS themes and leveraged to PM

Takaichi’s agenda. We would invest on an unhedged basis anticipating moderate Yen strength.

• We are constructive on North Asia versus South Asia & Australia, prefer Brazil versus the rest of Latin America, and prefer

Greece, Hungary & Saudi Arabia versus the rest of EEMEA.

• In general, we view the rally in EM as cyclical rather than the start of a new secular bull market.