Emerging markets are fast becoming the prime movers of various economic phenomena. As such, they can provide explosive opportunities for portfolio boost and diversification as they are expected to grow two or three times faster than the developed world. Here are more insights from USA Today:
U.S. vacationers aren’t the only ones that should broaden their horizons and go overseas. American investors should think about it, too, Wall Street pros say.
With U.S. stocks near record highs and up 9% in 2017, it’s easy for Main Street investors to stick to a U.S.-centric portfolio. But that strategy means they won’t be able to take advantage of strength in shares trading developing countries.
The iShares MSCI Emerging Markets Index ETF (EEM), which invests in places like China, South Korea and South Africa, has broken out to new highs this week and is at its highest level since May 2015. The ETF is up more than 22% this year, more than double the return of the U.S. stock market.
Factors driving the gains in emerging markets: a rebound in the global economy; a sense that years of better U.S. stock performance will give way to stronger gains from abroad; cheaper valuations in developing markets, and continued hints from the U.S. central bank that it won’t too hastily pull back on stimulus that is beneficial to emerging markets. Barring a global crisis, emerging markets are likely to fare well.
“It’s a market we want to have exposure to,” says Todd Sohn, analyst at Strategas Research Partners. Sohn says performance is being driven by gains in Hong Kong stocks and a recent surge in Taiwan shares, two countries with big weightings in the emerging market index.
Adds Joe Quinlan, chief market strategist at U. S. Trust: “U.S. investors should think long-term and recognize future growth, consumption and corporate earnings will emanate primarily from the likes of China, India and Mexico and others over the next decade.”