Emerging Markets: Down but not out!

Emerging Mkts 2Dear Mr. Market:

We write letters to you during good times and bad. That’s the beauty of the stock market and all the drama you bring with it! Without a doubt there will always be something to worry or cheer about! Perhaps no asset class personifies this struggle better than Emerging Markets.

We’ve written before about the appeal (and risk) that Emerging Markets brings to investors. Right now, in our opinion, there is a potential “changing of the guard” and a shift in asset class leadership. Although our friend Warren Buffett often gets credit for the following famous quote, it was actually originally from the 18th century British Nobleman, Baron Rothschild:

“The time to buy is when there’s blood in the streets.”

Emerging markets have been absolutely hammered the past few years. As you know, the big headlines that drove markets in 2015 was the plunge in oil prices, an incredibly strong U.S. dollar, and massive concerns about China (the world’s second largest economy, albeit an Emerging Market). It’s easy for investors to get scared out of their minds with an asset class that is historically more volatile than most; that’s probably why most investors are underexposed to Emerging Markets.

What often tells the story best is a picture and in this case we have one that is also backed up by facts: Check out this graphic that Calamos Investments put together.

Now keep in mind they are obviously touting their fund that covers emerging markets. We have a number of investments that do as well if not better (in our opinion) with much less cost. The point of all this is not to talk or think about the fund, but rather the asset class itself.

We firmly believe that over the next 12-18 months you will see an Emerging Market country (if not the entire asset class) lead domestic markets. Heck…could it be happening much sooner?

It is…Emerging Markets is beating the U.S. stock market right now. Although the year is young, emerging markets are up more than +3% higher than the S&P 500. Will your typical financial media outlet tell you this? No way… Their job is to tell you something well after the fact.

Emerging Mkts 1Lastly, speaking of facts… Don’t forget the major takeaway here: Since 1988 there have
been six times when emerging markets were down -25% or more and in each one of those time spans they came back significantly. On average, emerging markets returned +54.13% over the next 12 months.


Now you know something before it will happen…

1 thought on “Emerging Markets: Down but not out!

  1. Pingback: Q1 is in the books – how does the rest of 2016 look? | Dear Mr. Market:

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