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Yesterday in Money and Markets, I pointed out that the best-performing stock markets have consistently been outside the U.S. And it’s not just a fluke occurrence, either.
In fact, the top 10 best-performing stock markets last year were all emerging or frontier markets, according to Bloomberg. What’s worse, our domestic stock market has only cracked the top-10 list twice in the past 20 years.
The biggest winners in the global stock-market-performance derby have been, and I expect will continue to be, emerging markets.
I know what you’re thinking: Sure, emerging markets often produce big gains, but you must also take big risks to capture those profits. That has been true, at times, but generally speaking it’s a misconception.
Granted, emerging markets can be susceptible to spectacular crashes. Just look at China’s mainland Shanghai stock market, which plunged more than 60% in 2015. But losses like that are the exception, not the rule.
Plus, when you take a closer look at risk-adjusted returns in emerging markets, you’ll see that as an investor, you are more than compensated in upside profit potential for the risk you take in these markets …
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The table above, similar to the one I showed you yesterday, displays the top-10 global stock markets each year for the past 20 years. But instead of focusing on total return, this table is adjusted for volatile price swings, according to Bloomberg data.
And as you can see, even on a risk-adjusted total-return basis, emerging markets beat developed markets hands-down. Again, the U.S. only places twice on this list over the past 20 years!
When it comes to emerging markets, Asian nations make the list on a regular basis, and that makes perfect sense. That’s because Asia has been the biggest contributor to global growth over the past several decades, and it will continue to be for many decades to come.
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Where Will YOU Be When the K Wave Crashes? When the K Wave crashes into the American economy … You’ll either be one of the lucky few who are rich and secure; or one of the millions who are hungry, desperate, and afraid. Now you might be tempted to say, “Dow 31,000 sounds pretty good to me, Larry, I’ll just hold onto my U.S. stocks and watch them double in value.” In other words, you might be tempted to sit tight and do nothing. But sitting tight is the worst thing you could do, for three reasons … to find out what those reasons are click here before it’s too late! – Larry Edelson |
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In the last 15 years alone, China’s GDP has grown nine-fold, while India’s output is up 335%. These growth rates put developed markets to shame, as you can see in the graph below.
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The U.S. economy has expanded just 75% over the same period, while Japan’s output actually contracted 13%. (Hat tip to the always informative www.truewealthpublishing.asia for this timely graphic).
That’s precisely why my colleague Larry Edelson is so bullish on emerging Asian markets, where he is looking to gain more exposure in the region. That’s a smart investment recommendation, especially considering how remarkably undervalued many Asian markets are right now as compared to U.S. stocks.
Consider these stock-market-valuation comparisons and see for yourself:
* U.S. stocks are trading at 21 times trailing 12-month earnings, that’s close to the absolute highest valuation we’ve seen over the past 20 years, even higher than when U.S. stocks last peaked in 2007! Meanwhile…
* Stocks in Malaysia and Thailand are trading at just 16.9 times earnings …
* China’s mainland CSI 300 stock index and Singapore’s Straits Times Index are priced at just 12.7 times profits …
* And the Hang Seng China Enterprises Index, which follows Hong Kong-listed Chinese shares, looks especially dirt cheap today at only 8 times earnings!
Bottom line: If you’re looking for big profit potential from faster-growing markets outside the U.S., emerging Asia offers some of the best growth prospects. Plus, many of these stock markets offer the added bonus of very attractive valuation, compared to U.S. stocks. That’s a bullish recipe in my book.
Good investing,
Mike Burnick
Director of Research
Mike Burnick, with 30 years of professional investment experience, is the Executive Director for The Edelson Institute, where he is the editor of Real Wealth Report, Gold Mining Millionaire, and E-Wave Trader. Mike has been a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. He also served as Director of Research for Weiss Capital Management, where he assisted with trading and asset-allocation responsibilities for a $5 million ETF portfolio.
{ 5 comments }
Which Countries are likely to be in the top 10 in 2017? What % of your portfolio should be invested in each?
Hi, Thomas,
Here is an answer of so. with no investment experience who pretends to be good in mathematics : what about following a rule like the Pareto triangle, applying it to the advice M. Burnuck gives, by giving the first places to Asian Emerging markets? OK, do not know if Pareto’s law has a place in investing…! Regards.
Paulette Emmanuelle
The best thing to do is to go to Morningstar’s ETF page and rank ETFs by valuation, starting at the bottom. Use your favorite metric (price/earnings, price/book, price/sales, whatever). Ignore the thematic and sector ETFs — concentrate by country. Pick the bottom three to six countries and buy them.
For this year, I ended up picking Egypt, Brazil, and Japan (small cap, currency-hedged as the yen is going down). You could pick Russia or Nigeria. I stayed clear of those, because they’re plays on energy, and oil is heading down for much of this year. There’s also Italy (currency-hedged again), if you want to tiptoe into a burning building.
Sri Lanka and Pakistan could be safe bets in 2017
terrific article about the plans that China has made and is already implementing