Emerging Markets on The Rise

After a run of disappointing performance, emerging market stocks are perking up, says Validea CEO John Reese in a recent article for Nasdaq. Since January, this class of securities has gained more than 34% and the upward trend is expected to continue. Reese advises, however, that while the trend is a welcome change for yield-starved investors, investing in emerging markets should be based on the sort of fundamental business analysis inherent in our guru-based stock… Read More

Growth and Performance in Emerging Markets

Although it seems counterintuitive, evidence suggests that there is a negative correlation between economic growth (GDP) in emerging markets and stock market performance, says a recent Morningstar article. Alex Bryan, Morningstar’s director of passive strategies research (North America) explains that while emerging markets will “likely continue to grow faster than developed markets for the foreseeable future,” these gains might not extend to investors. Using real GDP data from the World Bank and the gross return… Read More

Not All Active Managers Created Equal

As investors continue to divert dollars from actively managed funds to lower-cost passively managed index funds, research conducted by two finance professors at Pace University has revealed an interesting finding, according to last week’s Wall Street Journal. The study found that diversified emerging-markets funds that are actively managed are more likely to outperform their less actively managed peers as well as index funds. Matthew Morey and Aron Gottesman, finance professors at Pace University’s Lubin School… Read More

Emerging Markets Are Making a Comeback

As the S&P 500 continues to hold investors’ attention with its steady climb, BloombergGadfly’s Nir Kaissar shares his perspective on how and why emerging markets might deserve some attention. Kaissar points out that emerging market stocks have recently outperformed the S&P 500, a sharp reversal from recent years. The MSCI Emerging Markets Index is up 14.8% this year (through August) compared to 7.8% for the S&P. There are signs, he says, that U.S. investors are… Read More

Waiting to Exhale: What Lies Ahead After the Brexit Vote?

“The healthy economy is one that makes its own decisions,” says Rob Arnott of Research Affiliates concerning possible fallout from Britain’s vote to stay or leave the European Union. In a recent CNBC interview, Arnott shared his views on the concern around Thursday’s result and how it will impact the markets. According to Arnott, the “fear mongering” around the vote is “a little over the top.” He says, “Roll the clock forward ten years. Is… Read More

Time to Bottom Feed Across the Pond

The U.S. stock market is expensive and bond yields aren’t far from record lows. European and emerging market stocks, on the other hand, have approached stomach-turning status, says Jason Zweig of the Wall Street Journal. The European market has dropped by 12% while emerging markets have plummeted by 21.8%. Stabilized oil prices and a possible interest rate hike by the Fed has lifted investors’ outlook on these markets by a marginal 2% to 3%, but… Read More

Four Conditions Reminiscent of 1999

Rob Arnott, founder and chairman of Research Affiliates, says that the recent market environment is reminiscent of 1999, just before the tech bubble burst. Writing in Barron’s, Arnott argues that the following four “conditions parallel the extremes of the late 1990s:” “Falling inflation expectations,” which Arnott argues “snap back in reasonably short order.” He observes that “after inflation expectations hit a basement low of 0.9% in December 1998, within six months they had jumped to… Read More

Diversification & Rock Bottom Valuations In the Third Pillar

Rob Arnott and Christopher Brightman of Research Affiliates recently discussed the allocation and performance of PIMCO All Asset Fund, which goes outside mainstream investments into what they describe as the Third Pillar. Arnott explains that a three-year bear market in Third Pillar investments has impacted investors’ outcomes and outlooks. Although the fund’s 7% loss from 2013 to 2015 is significantly better than the relevant benchmarks, it appears disappointing in light of the excellent performance of… Read More

Mobius: Russian Stocks Offer Major Upside

Mark Mobius, executive chairman of Templeton Emerging Markets Group, says that the Russian stock market provides investors with a tremendous value right now. Russian stocks are down 36 percent since the end of 2014, although they have rebounded and are up 20 percent so far in 2016. Still, Russian shares are trading at 0.67 price-to-book, which is more than 50 percent below the MSCI Emerging Markets index. Mobius says Russia has been hurt by two… Read More

Larry Swedroe on Emerging Markets, Recency Bias, and When to Buy

Director of Research for the independent investment advisor community BAM Alliance, Larry Swedroe, offers his take on the current underperformance of emerging markets versus U.S. stocks, the importance of recognizing recency bias, and the sensibility of buying low and staying globally diversified over the long-term. He notes that from 2008-15, the S&P 500 returned 6.5% annually for a total return of 66%, while the MSCI Emerging Markets Index lost 2.8% per year for a total… Read More