In the United States, consumers are gripping their wallets tightly. Overseas, it’s a much different story as emerging market citizens enter the ranks of the middle class.
The rampant spending that became an American trademark is on hold. Michael Snyder for Business Insider reports that the truth is that living on credit for decades has caught up with us as a nation. Americans are absolutely drowning in mortgage debt, car loans, credit card debt and student loan debt. [The Growing Case For Overseas ETFs.]
Now that the domestic consumer is tapped out, is it time to look overseas? Here are some points about why the spending shift may be going abroad:
- MarketWire reports that as disposable incomes rise in emerging markets, many products previously unattainable by average urban residents are becoming necessities. Today, more than 37% of the world’s cars are purchased in emerging-market cities, and sales of luxury autos already rival sales in Germany, Japan and the United States. This same trend in spending will cause emerging-market cities to account for 30% of global private consumption by 2015.
- Emery Brewer for Fund Strategy reports that emerging markets should be viewed through the prism of growth investing, a style that suits investment in companies in the fast-growing developing world. The developing world is home to much of the world’s in-demand natural resources, including an estimated 80% of world oil reserves and 50% of iron ore supplies. The fact remains that having the majority of of the finite resources necessary to sustain modern lifestyles places the emerging world in a position of strength to the less resource abundant developed markets.
- The rise of the emerging-market cities will also greatly boost demand for infrastructure. About 60%-70% of the total global investment in infrastructure will go to these cities by 2030 and emerging-market cities with a population of more than 500,000 will constitute the biggest commercial opportunity for companies in the coming decades, reports Xinhua Net. [Emerging Market Banking ETFs Get Stronger.]
For more stories about consumer spending here and abroad, visit our retail ETF category. There is an increasing number of ETFs available that attempt to capture emerging market consumer spending trends, according to the ETF Analyzer. They include:
- Global X Brazil Consumer (NYSEArca: BRAQ)
- Global X China Consumer (NYSEArca: CHIQ)
- Emerging Global Shares Emerging Market Consumer (NYSEArca: ECON)
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.