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Emerging Markets Dominate World Market Performance Quilt

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.

world stock market performance quilt

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.ems set the pace for global growth

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.

invest in EMs for tech exposure too

Figure 4. EMs Have Been More Resilient To Rising Rates, Part 2

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.

EMs outperformed in rising rate periods

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.

Calamos research finds EMs underappreciated and underweighted



As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to potential for greater economic and political instability in less developed countries.

Foreign Securities Risk: Risks associated with investing in foreign securities include fluctuations in the exchange rates of foreign currencies that may affect the U.S. dollar value of a security, the possibility of substantial price volatility as a result of political and economic instability in the foreign country, less public information about issuers of securities, different securities regulation, different accounting, auditing and financial reporting standards and less liquidity than in U.S. markets.

Emerging Markets Risk: Emerging market countries may have relatively unstable governments and economies based on only a few industries, which may cause greater instability. The value of emerging market securities will likely be particularly sensitive to changes in the economies of such countries. These countries are also more likely to experience higher levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets.

Morningstar Diversified Emerging Markets Category is comprised of funds with at least 50% of stocks invested in emerging markets.

The MSCI Emerging Markets Index represents large and mid-cap companies in emerging markets countries. Unmanaged index returns assume reinvestment of any and all distributions and, unlike fund returns, do not reflect fees, expenses or sales charges. Investors cannot invest directly in an index.

The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.

Before investing carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information or call 1-800-582-6959. Read it carefully before investing.

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