Making sense of the markets this week: June 14


A look at emerging markets, on the other side of the pandemic

Emerging markets can be a wonderful portfolio diversifier for Canadian investors. You might consider the equity ETFs and the fixed-income side as well. 

In this space, I’ve suggested investors give emerging markets a look on many occasions, including that post from November of 2020. From a Forstrong Global Asset Management report quoted in that post… 

“Today many investors are experiencing their own existential struggle with emerging Asia’s economic rise. On the one hand, the region—which we classify as China, India, Taiwan, Korea, Indonesia, Malaysia, Philippines, Thailand and Vietnam—has created enormous growth around the world. China alone has delivered roughly half of all global GDP growth over the last decade. This has been a crucial prop to a growth-deficient world.”

And here is a very good emerging markets primer, courtesy of Pimco. I recommend you give that a read. 

From that blog post … 

“As an expected wave of re-openings sweeps the developing world, a serendipitous set of external dynamics could fuel the post-pandemic recovery in the EM asset class. A broad index of commodity prices (Commodity Research Bureau) has returned to levels not seen since mid-2015, following a 68% yearly rebound—a potential key economic driver for the many emerging markets that rely on commodity exports. Also, real short-term U.S. interest rates have recently fallen to 50-year lows, a situation likely to support EM investments by fuelling capital flows to the developing world as investors search for yield.”

We’ve often discussed commodities and REITs as inflation-friendly assets, but certain stock markets (such as those found in many emerging market economies) can offer another layer of inflation and currency hedging. 

You’ll find some global and emerging market equity ETF options in the Best ETFs in Canada for 2021

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