Eq: EMs

(Rio de Janeiro)

The international monetary fund cut its growth projections globally this week. The advanced economies are still expected to keep pace, but the low-income developing countries are lagging. Many low-income countries are lagging in vaccine coverage and their exports are suffering because of this. These exports slowing led the IMF to cut the growth projection for Indonesia, Malaysia, Philippines, Thailand, and Vietnam from 4.3% to 2.9%. There is a slight trickle into larger economies as worker shortages have hurt American companies such as Nike. China remained robust to most of the slashes as its 2021 projection only dropped from 8.1% to 8.0%.


FINSUM: Don’t look for these growth projections to bear out in emerging markets if vaccine rates tick up. However, Fed tightening could slow growth in dollar-dependent countries.

(Rio de Janeiro)

Emerging markets make up a fraction of US investors' portfolios even though they account for a quarter of global stocks weighted by market value, and they are one of the most important tools to beat the markets moving forward. The biggest factor driving the divergence in emerging markets and US markets has definitely been earnings, which has pushed the gap to its widest levels in the last two decades. However, earnings aren’t the only component of stock valuation. Dividend growth is expected to double up on US markets with 3% as compared to 1.4-1.5% in the U.S. Meanwhile, emerging markets are trading at a ridiculous discount as their P/E is about 12x where the S&P 500 is an average of 20. The common ratio of P/E to expected earnings growth and dividend yield favors emerging markets, which is already assuming high earning growth for US stocks. Finally the last time the gap between emerging markets and U.S. stocks was this bad the EM went on to beat the S&P by 14% over the next 7 years.


FINSUM: This is the perfect opportunity to move abroad because presently the discount is just unjustified for emerging markets.

(New York)

Emerging markets are a key part of a well-diversified growth portfolio, but Covid has hindered how many…see the full story on our partner Magnifi’s site.

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