Over the past five years, investors in developed markets have not had to look far for growth opportunities. Stock markets in the US, UK and Europe have delivered significant returns to equity investors – and even fixed income has performed well despite record low interest rates thanks to economic uncertainty.
But 2017 has seen an about turn in fortunes, with emerging markets outperforming developed ones year to date: The MSCI Emerging Markets index has beaten the global index over the past 18 months.
After such a strong run in developed markets, it is inevitable that valuations begin to look stretched, especially in the US. But will emerging markets provide a compelling alternative for investors looking for capital growth and income?
“Looking to the future, it is clear that recent performance has weakened the valuation argument in favour of emerging markets, with valuation levels now close to average, both in absolute terms and relative to global equities,” said Morningstar analyst Simon Dorricott.
“That said, within the diverse markets in the emerging space there will always be areas of value for active managers to exploit, be they short-term traditional value opportunities or longer-term under-appreciated growth situations.”
Dorricott also expects earnings to pick up, following years of flat or negative numbers, driven by the technology, financials and energy sectors.
But emerging market investing brings its own unique set of challenges; corporate governance, state owned enterprises and stock markets which are more closely linked with economic health to name a few. This week we will examine the opportunities and risks offered by this heterogenous group of countries, and whether you should be adding exposure to your portfolio.
Monday: What is an Emerging Market?
We go back to basics for new investors and those who need a refresher
How Currency Impacts Emerging Market Bond Investing
Earnings Drive Emerging Market Gains
3 Biggest and Best Emerging Market Funds
Are Emerging Markets Still Cheap?
Tuesday: Investing in Asia
China, India, South East Asia and everything in between
How Does China Impact Emerging Market Investing?
China: Investor Fears Subside as Economy Grows
Belt and Road: An Investment Opportunity?
Aberdeen's Kaloo: India is the Top Emerging Market
Wednesday: Latin America Investing
Is now the time to invest in such a commodity heavy market?
Mexico Stock Market Outlook Dampened by Trump
Why Argentina is Not an Emerging Market
Political Crisis Threatens Brazil's Recovery
2 Top Rated Latin America Funds
Brazil Market Doubles Over 12 Months
Thursday: Russia and Emerging Europe
How the east is benefiting from recovery in the west
Eurozone Growth Boosts Emerging Europe Stocks
Why Russia is an Attractive Investment Opportunity
3 Reasons to Invest in Emerging Europe
Aviva: Russia Bonds are No Longer Good Value
Russia: More than Just an Oil Producer
Friday: Adding Emerging Markets to Your Portfolio
How, when and why invest in emerging markets
Hermes' 3 Top Stock Picks from Emerging Markets
Using Currency to Hedge Risk in Emerging Markets