If you’ve been reading the newspapers or watching the news on TV, you probably haven’t missed the reports all but sticking a fork in emerging market exchange traded funds (ETFs). But is it really so dire?
Yes, investors have pulled a large amount of cash out of emerging markets in recent weeks.
Okay, sure…it’s also true that emerging market ETFs haven’t been performing all that great lately – at least, not when you consider how they’ve done in years past. [Emerging Markets ETFs: Time to Write Them Off.]
And inflation isn’t just a U.S. concern – emerging markets may have to contend with the rising cost of food sooner than later.
Is it really fair to proclaim, then, that emerging market ETFs are finito?
Gary Gordon for the Street points out this simple fact: emerging market citizens spend a larger percentage of the disposable income on food and energy than those who live in developed countries. Despite that, however, the quickly-rising costs of food haven’t hurt emerging market stock markets as much as many thought they would. [Sentiment Changes Toward Emerging Markets ETFs.]
The performance of many countries in the wake of the recession should have taught us this: emerging markets are resilient and capable of recovering at a rate that can surprise even the most hardened skeptic.
Could we still see flat performance and investor exodus? Yes, but the long-term growth story of emerging markets hasn’t ended.
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.