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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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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