Grandma’s Portfolio Got Run Over by Emerging Market

“The thing that’s the most surprising regarding flows is money still coming into emerging markets ETFs,” said Lydon on CNBC’s Closing Bell. “The P/E (price-to-earnings ratio) on average is around 10. Even though emerging markets stocks are down 30% this year, growth tends to be up 20 to 30% so smart money is that a China trade deal is going to get fixed and these folks are jumping on the value bandwagon there because these stock prices are pretty cheap.”

The U.S. stock market has been the default play for investors during the historic, decade-long bull run, but October’s volatility that spilled into mid-November may have steered them off course and opportunities abroad could be an alternative.

Despite the deep declines, with respect to value compared to price, many of these ETFs from abroad present a profitable opportunity that can be realized, especially if China and the U.S. ameliorate their trade differences in 2019. It presents an interesting opportunity for the investor who is seeking value in terms of locating discounted assets.

Still, it will take a special kind of investor who can stay invested in emerging markets and reap its potential benefits. In essence, emerging markets represent a value proposition for those investors who are willing to accept the risk in lieu of the returns in the long-term horizon.

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