A recent slump in U.S. growth rates has started to spook investors again, prompting domestic indices to fall precipitously on Monday. Although I believe such market action is short- to medium-term, the differential between growth rates here and abroad should be considered.
According to the World Bank, developing economies will experience a growth rate of nearly five times our own. Although roughly one-half of all S&P 500 company revenues are from international operations, it still makes sense to earmark a portion of one’s equity portfolio to emerging markets. Even though volatility in these investments will likely be substantial, there is a good long-term case for investing directly outside the U.S.