Growth and Performance in Emerging Markets

Although it seems counterintuitive, evidence suggests that there is a negative correlation between economic growth (GDP) in emerging markets and stock market performance, says a recent Morningstar article. Alex Bryan, Morningstar’s director of passive strategies research (North America) explains that while emerging markets will “likely continue to grow faster than developed markets for the foreseeable future,” these gains might not extend to investors. Using real GDP data from the World Bank and the gross return version of MSCI country indices, Bryan found that across 41 countries (for the period from 1988 to 2015), higher economic growth did not translate into […]

Not All Active Managers Created Equal

As investors continue to divert dollars from actively managed funds to lower-cost passively managed index funds, research conducted by two finance professors at Pace University has revealed an interesting finding, according to last week’s Wall Street Journal. The study found that diversified emerging-markets funds that are actively managed are more likely to outperform their less actively managed peers as well as index funds. Matthew Morey and Aron Gottesman, finance professors at Pace University’s Lubin School of Business in New York, tracked the 67 U.S.-based actively managed emerging markets funds in the Morningstar database from 2009 through the end of 2014 […]

Emerging Markets Are Making a Comeback

As the S&P 500 continues to hold investors’ attention with its steady climb, BloombergGadfly’s Nir Kaissar shares his perspective on how and why emerging markets might deserve some attention. Kaissar points out that emerging market stocks have recently outperformed the S&P 500, a sharp reversal from recent years. The MSCI Emerging Markets Index is up 14.8% this year (through August) compared to 7.8% for the S&P. There are signs, he says, that U.S. investors are concerned about stretched valuations, as shares in what have traditionally been considered defensive sectors (consumer staples and utilities) are currently more expensive than those in […]

Waiting to Exhale: What Lies Ahead After the Brexit Vote?

“The healthy economy is one that makes its own decisions,” says Rob Arnott of Research Affiliates concerning possible fallout from Britain’s vote to stay or leave the European Union. In a recent CNBC interview, Arnott shared his views on the concern around Thursday’s result and how it will impact the markets. According to Arnott, the “fear mongering” around the vote is “a little over the top.” He says, “Roll the clock forward ten years. Is Europe still going to be trading with the U.K.? Of course they will. Will it be materially different from today? Of course not.” That said, […]

Time to Bottom Feed Across the Pond

The U.S. stock market is expensive and bond yields aren’t far from record lows. European and emerging market stocks, on the other hand, have approached stomach-turning status, says Jason Zweig of the Wall Street Journal. The European market has dropped by 12% while emerging markets have plummeted by 21.8%. Stabilized oil prices and a possible interest rate hike by the Fed has lifted investors’ outlook on these markets by a marginal 2% to 3%, but the fact remains that overseas stocks are cheap. In fact, according to data from MSCI, as of April 30th the average price-to-book value of European […]