Get Started


It’s All About Emerging Markets


By Ryan Payne, President

I found an article recently on MarketWatch.com called “Opinion: Incredibly Cheap Emerging- Markets Stocks Still Aren’t Worth Buying.” This is even though emerging-markets stocks are up double this year compared to U.S. markets. But the author calls it a “pseudo rally” in emerging-markets stocks that’s running out of steam because they’re in a secular bear market.

Three Keys:

A recent article on MarketWatch.com warns investors to steer clear of emerging markets

That author’s opinion actually defies extensive evidence to the contrary

The U.S. market is now fully valued and emerging markets are a smart buying opportunity

So his premise is the earnings growth isn’t that great. Meanwhile, Morningstar analyzes trends like this and estimates that earnings for emerging-markets companies will grow at 10% annually for the next five years. Whereas the S & P 500 projects to grow at 9% a year. So emerging markets are predicted to grow faster than the U.S., and if you look at emerging-markets valuations, they’re cheaper. So what am I missing here? Because it sounds like a pretty good deal. Maybe that author is short in the emerging markets and he hopes writing a negative article will get people to sell.

Then he goes on to say the U.S. dollar should remain strong. Well, the dollar actually took a huge hit last week, which was very good for emerging markets and they held up really well. So the author is wrong on that point too. Third, he says trade wars will hurt emerging markets most. Well, we’ve heard a lot of talk lately about a “Border Adjustment Tax” and still the emerging markets keep going up. Then he also says the Chinese economy is shaky. But the news coming out of China is they’re likely to have pretty good growth, at about 6.5% a year. Whereas the U.S. by comparison is looking at about 2% growth.

So my argument, and I think what investors need to be concerned about, is you could have just owned the S & P 500 or large cap U.S. companies for the past eight years, and you would have been right because the market has been on a magnificent run. But the problem is if you look at historical valuations, right now we already have a fully valued U.S. market, and you’re going to need a return on your portfolio moving forward. So it’s important to reposition your portfolio globally, because many of the valuations overseas are a lot cheaper and have significantly more room to grow in the future.

You need to be smart about it, look at your portfolio objectively and recognize that the U.S. has had a great streak, but realistically it can’t keep up that kind of growth. Especially when we now have what some would actually call an overvalued U.S. market. That’s why articles like the MarketWatch story are totally off-base, because there are other markets around the world that historically do very well and right now are actually outperforming the U.S. market.


Interested in learning more about what impact this could have on your future financials? Contact one of our expert advisors today:

bit.ly/2pWWrzd or call us at 646.461.7670

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Payne Capital Management, LLC), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Payne Capital Management, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Payne Capital Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Payne Capital Management, LLC’s current written disclosure statement discussing our advisory services and fees is available for review upon request.