Category Archives: Emerging markets

Foreign markets are soaring

The US markets are reaching new highs daily and many investors are happy with the returns their portfolios have generated.  According to the Wall Street Journal the S&P 500 is up 13.9% year-to-date.

 But some foreign markets are doing even better.

For example, the Hang Seng (Hong Kong) index is up 29.4%.

Chile is up 28%

Brazil up 27.3%

South Korea up 22.1%

Italy up 16.4%

Taiwan up 15.8%

Singapore up 14.7%

As part of our asset allocation strategy we always include a foreign component in our diversified portfolios.  Over long periods of time international diversification has had a positive effect on portfolio performance.  That’s because the US economy is mature.  It’s harder to generate the kind of economic growth that smaller, newer, and less developed economies can generate.

There is, however, a level of risk as well as reward to global diversification.  It’s said that when the US catches a cold, foreign markets get pneumonia.

The U.K. market is up only 5.8% this year, Shanghai +9.1%, Mexico +9.5%, Japan +9.6% and France +10.3%.  It’s difficult for the average investor to do the research to pick and choose their own foreign stocks.  So it’s even more important when investing overseas to use experienced portfolio managers with years of experience and an established track record.

We have done the research and we choose the best mutual funds with experienced managers to give our clients exposure to foreign markets.

Tagged , , ,

Recovery of Emerging Markets

The MSCI Emerging Markets Index, up 28.09%, is the best performing major index year-to-date – better than the DASDAQ, better than the S&P 500, better than the DJIA.  That’s an amazing reversal.

Emerging Markets have lagged the other major indexes over the last decade.

  • 2.21% for 3 years (vs. 9.57% for the S&P 500)
  • 5.56% for 5 years (vs. 14.36% for the S&P 500)
  • 2.76% for 10 years (vs. 7.61% for the S&P 500)

Why do we mention this?  A well diversified portfolio often includes an allocation to Emerging Markets.  Emerging Markets represent the economies of countries that have grown more rapidly than mature economies like the US and Europe.

Countries in the index include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, and the United Arab Emirates.  Some of these countries have economic problems but economic growth in countries like India, China, and Mexico are higher than in the U.S.

Between 2003 and 2007 Emerging Markets grew 375% while the S&P 500 only advanced 85%.  As a result of the economic crisis of 2008, Emerging Markets suffered major losses.  It is possible that these economies may now have moved past that economic shock and may be poised to resume the kind of growth that they have exhibited in the past.  Portfolios that include an allocation to Emerging Markets can benefit from this recovery.

Tagged , , ,
%d bloggers like this: