“Winter Charts” is a series of current financial topics explained in dots, lines, and only a few words—just the right “mix” to concisely convey ideas for critical thinking about investing.
As we concluded in our recent entry, Don’t Forget Your Shopping List, when it comes to investing, not all emerging markets (EM) are created equal. Today, we know that buying the BRICs (Brazil, Russia, India, and China), as the original path to EM investing, has been too narrow an approach. In particular, the commodity “meltdown” since 2011 has had a severe negative impact on most of the BRIC economies.
Whereas emerging economies have “staged” a bottom-building with respect to their equity markets since the summer, we continue to observe a positive divergence of markets less dependent on the price of commodities—especially oil.
With future growth certain to take place in the emerging world, creating an allocation to EM is key to a long-term, diversified, global portfolio approach. In this respect, we continue to de-emphasize highly volatile commodity markets and their related economies, and instead focus on developing nations with a strong manufacturing base, paired with favorable socioeconomic trends and limited external funding needs.
Matthias Paul Kuhlmey is a Partner and Head of Global Investment Solutions (GIS) at HighTower Advisors. He serves as wealth manager to High Net Worth and Ultra-High Net Worth Individuals, Family Offices, and Institutions.