(Bloomberg) -- Mexico, India and Saudi Arabia have the potential to hand global equity investors outsized returns next year, while emerging markets as a whole may languish with single-digit returns, JPMorgan Chase & Co. said.

The New York-based bank’s prognosis comes as developing-nation equities head for a sixth successive year of underperformance versus the US benchmark — the S&P 500 Index. JPMorgan predicts, in its base case, the MSCI Emerging Markets Index could end 2024 almost 9% higher than current levels, though a more pessimistic scenario calls for an 11% decline.

The guarded optimism of JPMorgan underscores two dilemmas emerging-market investors have faced in 2023. First, stocks have see-sawed throughout the year, preventing investors from turning strategically bullish on the asset class. JPMorgan sees no change in that trend. Secondly, a disparity within the developing world is widening, with a few countries cornering the bulk of the gains in growth, earnings and capital flows. That may continue too.

“EM equities behave as an asset class requiring market timing skills for in and out – more tactical than strategic allocation and next year looks to be no different,” strategists including Pedro Martins Junior write in a note dated Nov. 29. Next year “might start bumpy for EM equities largely driven by a challenging global macro picture.”

JPMorgan’s view might bring a reality check for investors who have been emboldened by bets for a dovish Federal Reserve next year and sent emerging-market stocks to the best monthly gain since January. Stocks have added $1.86 trillion since late October when easing concerns about US inflation fueled bets that the global monetary-tightening spree is over.

Read more: Emerging Markets Poised to End November With Best Gain This Year

However, index-level figures mask wide variations in the performances of national benchmarks. While countries such as Argentina and Poland have rallied from market-friendly election outcomes, markets including Pakistan and Egypt have gained on the back of dollar inflows. Meanwhile, the biggest emerging market — China — has missed the rally. Mainland stocks are capping a fourth month of losses, while enterprise shares listed in Hong Kong are little changed in November.

Read more: China Misses Out on Everything Rally With Economy in Doldrums

JPMorgan says 2024 could see markets with strong growth, robust earnings outlooks or close ties with the US economy outperform. 

India should benefit from strong domestic participation and attractive risk-adjusted returns relative to developed markets, while Saudi Arabia may see positive earnings revisions from higher oil prices. Meanwhile, Mexico is likely to cash in on the near-shoring trend, with US manufacturers moving manufacturing closer to home.

China won’t be a washout though, according to the bank. JPMorgan sees a “tactical” opportunity to be bullish there, and is also overweight in countries that are indirectly exposed to its economic recovery — such as Brazil, Thailand and Indonesia.

Still, JPMorgan said its asset allocation view stops short of being positive on risky assets because of high interest rates and geopolitical developments. 

“At this level of monetary restriction, a deeper-than-expected global economic deceleration could materialize and support a risk-off market — not ruling out a financial accident,” the strategists wrote. “Such a scenario invites investors to explore downside risk for EM equities.”

©2023 Bloomberg L.P.