If there’s one thing that irks me more than anything else in the investment world, it’s when analysts consider just one side of the coin.
There’s always the other side…
To me, everything is relative. Is the U.S. dollar strong? “Well, compared to what?” I’d ask in reply.
Are European stocks a good buy? “Well, better than Chinese stocks… but not as good as U.S. stocks,” I’d answer.
That’s why the growth story emerging market analysts tell has led emerging market investors into near double-digit losses so far this year. Ouch!
Despite the fact that GDP growth in the BRIC markets – Brazil, Russia, India and China – still outpaces GDP growth in the U.S. and western Europe, developed market stocks have been a better buy this year.
Even China, with its GDP growth over 7% – double or triple the rate of every other developed country – has taken investors for a painful ride into losers territory. Check it out…
The fact that U.S. stocks can outperform all other markets, despite what most economists call weak economic growth, is proof enough that you can’t simply equate growth to investment returns.
Of course, it’s equally unwise to simply turn your back on these emerging markets. As Harry mentions above, these markets will be hot… eventually. And some companies have already figured out how to capture the benefits of emerging market growth, while limiting the volatility and downside of these regions’ stocks.
In Boom & Bust, we continue to search for the best opportunities in all markets. Taking a prudent, balanced approach allows us to take advantage of growth trends, while limiting our exposure to the wild-ride swings of emerging market stocks.