Why this corner of the global market is poised to outperform the US

Several trends are giving us reason to grow bullish on emerging market equities, with increasing potential for growth throughout the course of this year.

We are currently witnessing a peak in the global economic cycle; economic surprises are either coming in less positive (as is the case in the United States), or are starting to disappoint (as is the case in Europe), along with some spots in emerging markets.

This can be measured by the proprietary Citigroup Economic Surprise Index, which takes stock of how economic data are coming in relative to expectations. The index fell in the beginning of this year, trading sideways for the bulk of the first quarter.

While stimulus in the U.S., along with confined accommodative monetary policy abroad, may mitigate global risk in the short term, we do see that earnings cycles are also starting to peak.

In the U.S., earnings cycles have moved ahead of the economic data, and are leading the economic data sideways. Meanwhile, emerging market earnings have been behind the economic cycle and still show potential for continued expansion.

Furthermore, trade has proved to be the biggest driver of the economic expansion, which has benefited emerging market equities most. Talk of protectionism in the U.S. plays strongly into the hands of China, pushing down the dollar's relative value. In turn, this will continue to create opportunities in emerging market equities.

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Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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