Having a strong understanding of the emerging markets landscape is crucial for any advisor. But what’s hot?
Having a strong understanding of emerging markets is crucial for any advisor who wants to help their clients build truly diversified portfolios. Becoming an expert in the space is a real-no brainer. But what’s the current state of the emerging markets landscape?
“When talking about average, looking at emerging markets alone, for example, you find reasonably rapid growth… 5%–6% growth in some countries of Asia, and the large majority are at least reasonably positive,” said Jonathan Lemco of Vanguard Investment Strategy Group in a recent interview. “Eastern and Central Europe {are seeing growth of} 2%, 3% in some cases. A little bit negative in a few. But overall, 2% or so. It's not great, of course, but at least it's positive.”
The Latin American markets are expected to experience varied performance over the next year. The largest country in the region, Brazil, is expected to achieve negative GDP growth for next year, according to the IMF. The expectation for Argentina is also negative or zero GDP growth.
“But, by contrast, very well managed (politically and economically) polities and economies like Chile and Mexico and Columbia and Peru are doing better,” Lemco said. “And better means 3%, 4% or so. Not what it was before, but still adequate and providing, from an investor point of view, some opportunities as well. So we've got to be very careful not to generalise.”
For advisors looking to take advantage of hidden gems, solely looking at economic growth and the stock market performance is not enough. “If you're a fixed income, or bond, investor, you're paying very careful attention to how much debt and deficit that country has. What is its fiscal performance? What is its foreign country reserve capability, and so on? Is it politically stable? All of these are characteristics that go into the mix,” Lemco says. “And one thing that I would just stress at this time and, again, particularly with regard to emerging markets is: we're seeing relative to the last 10 years, 20 years, 30 years and so on, reasonably solid performance with regard to all of those indicators.”
“When talking about average, looking at emerging markets alone, for example, you find reasonably rapid growth… 5%–6% growth in some countries of Asia, and the large majority are at least reasonably positive,” said Jonathan Lemco of Vanguard Investment Strategy Group in a recent interview. “Eastern and Central Europe {are seeing growth of} 2%, 3% in some cases. A little bit negative in a few. But overall, 2% or so. It's not great, of course, but at least it's positive.”
The Latin American markets are expected to experience varied performance over the next year. The largest country in the region, Brazil, is expected to achieve negative GDP growth for next year, according to the IMF. The expectation for Argentina is also negative or zero GDP growth.
“But, by contrast, very well managed (politically and economically) polities and economies like Chile and Mexico and Columbia and Peru are doing better,” Lemco said. “And better means 3%, 4% or so. Not what it was before, but still adequate and providing, from an investor point of view, some opportunities as well. So we've got to be very careful not to generalise.”
For advisors looking to take advantage of hidden gems, solely looking at economic growth and the stock market performance is not enough. “If you're a fixed income, or bond, investor, you're paying very careful attention to how much debt and deficit that country has. What is its fiscal performance? What is its foreign country reserve capability, and so on? Is it politically stable? All of these are characteristics that go into the mix,” Lemco says. “And one thing that I would just stress at this time and, again, particularly with regard to emerging markets is: we're seeing relative to the last 10 years, 20 years, 30 years and so on, reasonably solid performance with regard to all of those indicators.”
