• Consumer Sectors Poised to Benefit from Lower Oil Prices: One of the best-performing broad-based EM Indexes in the WisdomTree lineup is the WisdomTree Emerging Markets Consumer Growth Index (WTEMCG), which is up 7.1%. When we look at how the countries in WTEMCG have done YTD, it is clear that the oil importers, led by China, Thailand and Turkey, were the three largest contributors to performance, while Russia, the net oil exporter, was the largest detractor.
– Lower spending on oil puts money back in the consumers’ pockets that can be spent elsewhere. Thus, the consumer growth index has benefited from lower oil prices, with strong returns in the consumer related sectors of the market.
With lower oil prices, it is important for investors to consider how their portfolios are positioned for the changing commodity landscape. As we have discussed, a number of emerging market benchmarks—including the traditional cap-weighted benchmarks and the high-dividend equity-income strategies—are heavily exposed to the commodity sectors. Investors who believe that oil prices will continue to decrease should consider India and the consumer growth stocks as areas of focus in emerging markets.
1Source: Bloomberg, as of 12/3/14.
2Source: BP Energy Outlook 2035, January 2014.
3Source: BP Energy Outlook 2035, January 2014.
4Source: Bloomberg, 12/31/13‒12/3/14 on total returns; WTEMHY holds Rosneft 3.5%, Gazprom 4.6% and Lukoil 3.4% as of 12/3/14.
5Source: Bloomberg, 12/31/13‒12/3/14 on total returns;
Important Risks Related to this Article
Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments. Investments focused in India are increasing the impact of events and developments associated with the region, which can adversely affect performance.
Investments focused in Russia are increasing the impact of events and developments associated with the region, which can adversely affect performance. Dividends are not guaranteed and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time. Investments focusing on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development. This may result in greater share price volatility.