News Column

Emerging markets have room to grow

June 16, 2014



A: Investors afraid they missed the rally by U.S. stocks to new highs are looking for better values. And emerging markets are certainly an area of markets that have not recovered to the pace of U.S. stocks.

Both the Standard & Poor's 500 index and emerging markets stocks are up this year, by about the same amount. The S&P 500 is up 5.8% while the Vanguard Emerging Markets exchange-traded fund is up 5.3%. The big difference, though, is that the S&P 500 is at or near all time highs, while emerging markets aren't even close.

In the past five years, the S&P 500, which is heavily weighted toward companies based in the U.S., is up 110%. During the same time, the Vanguard Emerging Markets ETF is up a much more modest 39%. The Vanguard Emerging Market's ETF is still a good 43% below the record highs it hit in late 2007.

Investors thinking U.S. stocks are looking a little top-heavy might start thinking about adding emerging markets stocks to their portfolios.

While emerging markets stocks sport relatively high volatility, they tend to zig when markets zag. The fact emerging markets don't move in lockstep with the U.S market makes them a good possible addition to most portfolios.


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Source: USA Today


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