Emerging Markets (EM) sometimes can feel like the forgotten middle child within the greater equity asset class as performance over the last decade has been lackluster from a relative perspective.
Over the last decade, EM equities have underperformed International Developed equities along with their U.S. Large, Mid, and Small Cap counterparts. When we think about the next decade, Emerging Markets could provide growth opportunities over a longer time period.
Currently, behind U.S. Large Caps, Emerging Market equities are the second-best performing equity asset class year-to-date. Emerging Market (EM) index returns have rebounded in recent months, mostly due to positive technology exposure within Taiwan and a slight re-rating higher of multiples in China. EM equities include the stock of companies from many countries including Mexico, Brazil, India, China and others. With over a third of the equity market found outside of the U.S., excluding exposure to countries with rising demographics and fast-growing companies may prove to be a disadvantage to portfolios.
There have been different regimes over the decades where asset classes have had a wide dispersion of performance. What we see in the current and upcoming regime within Emerging Market equities is an asset class of cheaper equity valuations, cheaper currencies, and a combination of cyclical and structural investment themes that could potentially help boost long-term returns. When thinking about allocating capital for years to come, SDWMA believes a globally diversified portfolio is the key to long-term success despite short-term volatility.
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Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice. Registration with the SEC does not imply any level of skill or training.
