May 4th Weekly Market Update
The evaluation process NFL football teams go through to prepare for the NFL draft, which took place this past weekend, is not unlike the investment decision-making process. We in LPL Research get in our “war room” every day to scour global markets for investment opportunities. Like NFL teams looking for talented football players to add to their teams, when looking for investment talent we are also looking for some of the same qualities: speed, strength, value, upside potential, and character. Emerging markets (EM) score well on these criteria overall and, we believe, may represent a good draft pick for your portfolios.
FINDING INVESTMENT TALENT
We believe emerging markets score well when evaluated along some of the same criteria that NFL football teams use to assess potential draft picks: Speed. Football teams look for fast players; we look for fast-growing or accelerating economies. Some of the fastest-growing economies in the world are emerging market economies, particularly in Asia, supported by favorable demographics, monetary stimulus, and policy reforms. China’s economy grew at a reported 7% pace during its most recently reported quarter (Q1 2015) and is expected to grow at that pace for the full year, based on Bloomberg consensus forecasts. We do, however, acknowledge China’s true growth rate may be slightly lower than its reported growth rate. More broadly, Asia ex. Japan is growing at a more than 6% pace, while the so-called “BRICs” (Brazil, Russia, India, and China), despite the drag from a contracting Russian economy, are expected to grow at a more than 5% pace in 2015, faster than their developed country counterparts. Despite stalled growth in Brazil, EM offers the best speed, while developed markets — mainly Europe and Japan — are just plodding along.
For the full article: EMERGING MARKETS MAY MAKE A GOOD DRAFT PICK TO ADD TO PORTFOLIOS