Earnings Season’s Big Message for ETFs

November 9th at 1:00pm by Tom Lydon

Every quarter it happens: earnings are announced and the markets look for patterns and other telling bits of information. The most recent information seems to say a lot about emerging markets and how investors can get exposure to them by using exchange traded funds (ETFs).

The news is this: companies that are growing are relying on overseas markets instead of hoping that the American consumer is suddenly going to let loose with the cash. Ron McNeil for MarketPlace reports that Merck (NYSE: MRK), for example, says it now gets 18 % of revenue from emerging markets. [Consumer ETFs Get a Lift from Emerging Markets.]

Merck isn’t alone – the same goes for Dow Chemical (NYSE: DOW), Procter & Gamble (NYSE: PG), Caterpillar (NYSE: CAT), McDonald’s (NYSE: MCD) and many others.

What gives? Reasons include:

  • Emerging markets are starting out so small that any growth is big growth. Considering the billions of people in countries like China and India, those new buyers will make a big splash.
  • The United States is becoming less of a factor in the world’s market; by 2040, India and China are forecast to be 51% of the world’s market.
  • Emerging nations are building up their infrastructure. When that happens, consumer growth in these markets could skyrocket.

Does that mean the United States is dead? No. In fact, this overseas growth is beneficial in that it makes up for the slack and keeps our companies strong.

When you’re looking for emerging market ETFs in the ETF Analyzer, consider those that hold domestic companies, including those listed above, for exposure. As we’ve seen, it’s not just companies domiciled in those regions that are benefiting from the growth. [Jack Bogle's Take On International ETFs.]

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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