First Published: November 11, 2016.
Which are the top-performing stock markets in the world? Since 2012, they've been countries in emerging markets—Brazil (2016), Hungary (2015), Egypt (2014), United Arab Emirates (2013) and Turkey (2012). As the world stock market performance quilt shows, emerging markets finished on top for 2016. And it was a clean sweep: EM countries were the top five performers of the year.
Figure 1. World Stock Market Performance: EM Countries Have Dominated Since 2012
Based on annualized returns of the MSCI ACWI constituent stock markets.
Over the same time period, growth in the United States has been muted—ranking only once as a top five performer among MSCI ACWI constituents on the five-year quilt. This underscores EM's potential to provide the essential diversification and growth that U.S. investors yearn for in this environment.
As more growth comes from emerging markets, financial advisors increasingly realize that EM equity belongs in clients’ portfolios. In fact, our research tells us that 61% of advisors consider emerging market equity a core portfolio allocation.
The good news is that Calamos can help. Recognizing that keeping up with emerging markets can be time-consuming, we offer quick, graphic emerging market intel—Calamos EM Snapshot—to help advisors stay up-to-date on the space and its potential.
More Emerging Markets Snapshots
Below we highlight a few EM Snapshots.
Figure 2. EMs Continued Growth Forecast—But Targeted Exposure Will Be Key
The IMF expects emerging market and developing economies to continue to lead global growth. However, EMs vary in regard to fundamentals (e.g., deficits, balance of trade, commodity importers vs. exporters, etc.) and other factors, such as economic reform trajectories. Selectivity and targeted exposure may help investors better access investment opportunities in emerging economies.
Figure 3. Technology Outweighs Commodities in EM Index
If your clients think emerging markets are synonymous with commodities, it may be time to update them. The MSCI EM Index, a proxy for investment opportunities in EM, has a greater weighting in technology than even the S&P 500 or other developed market indices including Japan and Europe. Emerging markets offer growth potential across multiple sectors.
Figure 4. EMs Have Been More Resilient To Rising Rates, Part 2
Here's an update to our October 14, 2016 EM Snapshot.
Rising U.S. interest rates can concern investors. Over the past 25 years, there have been 10 periods when the 10-year U.S. Treasury yield rose more than 100 basis points. During the most recent rising rate period from July 2016 to December 2016, EMs performed positively. On average across all periods, EM equities significantly outperformed U.S. equities and bonds.
Figure 5. Untapped Opportunity in Emerging Markets
Emerging markets represent nearly 50% of the global economy (global GDP) and will likely be a critical source of capital appreciation for growth-seeking investors. However, just 3% of mutual fund assets are invested in emerging market equity funds, which suggests that investors have insignificant exposure to where the growth is, now and in the future.
Advisors, like what you've seen? Don't stop now: