With global markets suffering across the board in January, the controversy over investing in emerging markets at the Inside ETFs 2016 conference on Tuesday was fairly subdued. Portfolio specialists are generally bearish — though there are trends that make these investments compelling, some point out.
“Currencies in emerging markets are falling off the table, the standard of living is dropping dramatically – as is the asset class overall,” said Richard Bernstein, CEO of Richard Bernstein Advisors. He would rather put money into U.S. consumer plays, which are benefiting – not suffering from – low commodity prices.
Dennis Gartman, a money manager and founder of The Garman Letter, said, “I stick with the definition I’ve heard – that emerging markets means you cannot emerge in an emergency … due to a lack of liquidity.”
But Marc Faber – author of the Gloom, Boom & Doom Report – emphasizes looking at countries near Thailand, namely Cambodia, Vietnam and Myanmar, which are growing.
“I see emerging markets as an asset class, but you have to look at individual markets and economies,” he explained to a crowd of about 2,000 advisors and others at the industry event in Hollywood, Florida.
“Some did exceedingly well from the ‘09 low to the ’14 high. There was some consolidation in 2015. So be selective,” Faber said.
While this group has “grossly underperformed the U.S. since 2011,” it could outperform the U.S. in the next bull market “which you are really have to be an optimist to think that is coming anytime soon,” he adds. “But when it happens, emerging markets should outperform the U.S., where valuations are high.”
In addition, Marten Hoekstra, CEO of Emerging Global Advisors, suggests that low prices for this asset class are a positive for investors. “We would certain say that emerging markets are at least as good a value as everything else,” hev explained. “We do not make timing calls.”
If the economies of the emerging markets or the developed countries expand, then that is good for emerging market equities, says Hoekstra, who formerly led UBS Americas’ wealth unit. He also points out that China retail sales have been up year over year, but are down in the U.S.
“But are emerging market equities really cheap enough for U.S. investors?” asked Bernstein. “I say there’s little to no value, and they’re not good enough.”