If you are a US based investor, you can be forgiven for ignoring Emerging Market stocks over the last few years. Investors tend to gravitate towards good returns and Emerging Market returns have been anything but good in recent years. However, things are looking up for this overlooked asset class. 2016 was the first positive year for this asset class since 2012 – the MSCI Emerging Market benchmark was up 11%* in 2016. This year has been even better – as of the end of the third quarter (9/30/17) the Emerging Market benchmark is up about 25%* in 2017. This return is soundly beating both International Developed Markets and the S&P 500 over the specified time frame.
What are the reasons for this dramatic turnaround? I am sure there are many, (and remember, markets do not need a “reason” to move) but if I had to name a few: stabilization in oil prices, cheap emerging market currencies, and underweight positioning in investor portfolios. If you would like to read a great article getting into the specifics on Emerging Market stocks and their valuations, this article from Research Affiliates will do the trick.
Emerging Markets have their risks of course (political, monetary, etc…) – these countries are “emerging” for a reason. Because of this relative instability verses the developed world this asset class has historically been more volatile than US and International stocks, so tread lightly. Will the recent run continue? Only the future will tell, but nothing brings attention to an asset class like great returns. And over the past two years, Emerging Markets have just that!
*All returns are from Morningstar.com
**The above article is informational in nature only and is not a recommendation to buy or sell securities. All information is gathered from sources believed to be reliable, but neither Charles Brown nor Ausdal Financial Partners, Inc guarantees the accuracy of the information. All investments carry a degree of risk. Individuals should consult with their tax and investment professionals before making changes to their investment portfolios.
***Securities and Investment Advisory services offered through Ausdal Financial Partners, Inc, 5187 Utica Ridge Road, Davenport, IA 52807 (563)326-2064. Member: FINRA/SIPC. M.Brown and Associates and Ausdal Financial Partners are independently owned and operated