Have the mutual funds investing in EM’s reached the level where they are completley out? Well analysts may say they have not and we could see more pain but then who knows exactly when and where the pain will end. But then we know for certain the following,
- EM stocks are now relatively cheap, while U.S. stocks are relatively expensive.Unless US market crashes and the stocks there become attractive.
- The most successful investment strategy has been to buy what’s cheap and sell what’s expensive.
- Stocks are 5 to 10 year plus investments, so what really matters is not what is going to happen next month or even next year, but what is going to happen over 5 to 15 years from now.
- Most retail U.S. investors, who have a long track record of buying and selling stocks at the wrong times, are heavy sellers of emerging-market stocks.
- Money managers, who loved emerging-market stocks when they were expensive two years ago, now hate them. For a good reason too , they are losing money and their figures have gone wrong.
- “Emerging market” investment fashion statement. They account for a large and growing percentage of the global economy. According to the International Monetary Fund, they now account for about 40% of the world’s gross output when measured in U.S. dollars—up from less than 25% a decade ago.
- Emerging markets generally are under-represented in the “global” equity indexes. Bank of America estimates emerging market stock markets account for just 10% or so of the world’s stock markets by value.