Emerging Market ETFs Capture the Next ‘Engine of Growth’

April 3rd at 6:00am by Tom Lydon

While the U.S. and Eurozone economies are markedly better situated than they were last year, growth in the developed economies will still move at their sluggish speeds. On the other hand, developing economies continue to expand at a rapid pace, and emerging market exchange traded funds may allow investors to capture the next growth story.

Europe dodged a full blown financial crisis but the Eurozone fiscal integration and peripheral reform remain unresolved, and the U.S. still has to grapple with high consumer debt and depressed real wage growth, writes Russ Koesterich, iShares Global Chief Investment Strategist, in a research note.

“As we’ve stated in the past, we’re skeptical that even with the recent improvements in the labor market the United States can be the engine of growth,” Koesterich said.

On the other hand, emerging markets will likely lead any further gains in global equities. According to a Reuters poll of 380 equity strategist, emerging market Indices will so robust gains this year, led by Russia, Brazil, India and Chin, reports Andy Bruce for Reuters. [Best Emerging Market ETFs]

“Given that neither the United States nor Europe is likely to be the engine of growth, prospects for faster global growth and an accompanying pick up in corporate profits are likely to rest with emerging markets,” Koesterich added.

However, growth will be somewhat dependent on China finding a solution to a soft landing, he noted. [Are China ETFs In for a Hard Landing?]

Some broad emerging market ETFs include:

  • Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO)
  • iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM)
  • SPDR S&P BRIC 40 ETF (NYSEArca: BIK)

Vanguard MSCI Emerging Markets ETF

For more information on the developing economies, visit our emerging markets category.

Max Chen 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.