Emerging market exchange traded funds (ETFs) saw their asset levels dip last month, but that doesn’t necessarily mean the run is over. In fact, if inflation takes hold and that old risk appetite comes back, emerging markets could be directly in line to benefit.
According to Amit Lodha, manager of the Fidelity Global Real Assets fund, prices could surge over the next three to five years after the Occident embraced high debt burdens and loose monetary policies, writes Will Roberts for IFAonline.
Lodha found that during inflationary periods since the 1970s, basic resources beat the market 100% of the time and oil and gas outperformed the market 80% of the time. Additionally, the two sectors are underpinned by long-term growth prospects of the emerging markets. “Growth, development and the increase in both infrastructure and consumption spends in emerging markets is an investment theme that will stay with us for the next 20 to 30 years,” says Lodha. [Chile ETF: The Costs of the Earthquake.]
Furthermore, Neptune’s research estimates that emerging markets will provide around two-thirds of incremental growth in global GDP over the next five years. [Benefits of Looking Abroad with ETFs.]
According to Michael Kahn for Barron’s, emerging markets are in the the hot seat for the short term, but don’t expect that to last. Kahn postulates that emerging market stocks have been showing some recent weakness as a result of investors avoiding riskier emerging market assets, thanks in part to the situation in Greece. However, Kahn believes that emerging markets will perform over the long-term, and risk-averse investors may wait to buy at a better opportunity in the near future.
For more information on emerging markets, visit our emerging markets category.
- Emerging Global Shares Dow Jones Emerging Markets Energy Titans (NYSEArca: EEO)
- Vanguard Emerging Markets ETF (NYSEArca: VWO)
- iShares MSCI Emerging Markets Index (NYSEArca: EEM)
For full disclosure, Tom Lydon’s clients own shares of EEM.
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.