Emerging markets: a world of opportunity
- Emerging markets (EM) debt and equity assets tend to be under represented in U.S. investors’ portfolios.
- The long-term case for EM exposure remains strong. Strategic allocations to these assets may provide diversification benefits, enhanced return potential and compelling yield.
- Even with heightened uncertainty about the U.S./China trade dispute, attractive EM investment opportunities are still available— but selectivity and active management are key.
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1 IMF World Economic Outlook database, April 2019.
2 Barnes, P. “Why Emerging Markets Have Better Demographics,” Market Realist, 6 December 2016.
3 Pezzini, M. “An emerging middle class,” OECD Yearbook 2012.
4 Kharas, H. and Hamel, K., Brookings Institute. “A global tipping point: Half the world is now middle class or wealthier,” 27 September 2018.
5 Source: JPMorgan.
6 Source: Bloomberg, L.P. GDP-weighted quarterly calculation encompassing 68 EM countries.
7 EM earnings were subsequently upgraded in early April 2019, but only by 0.2%.
8 Source: FactSet.
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A basis point is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001). Yield is the income return on an investment, such as the interest or dividends received from holding a particular security. Earnings per share (EPS) is the portion of a company’s profit allocated to each share of common stock. Earnings per share serve as an indicator of a company’s profitability. Option-adjusted spread (OAS) is the measurement of the spread of a fixed income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option. Price/earnings ratio (P/E) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). JPMorgan Emerging Markets Bond Index Global Diversified limits the weights of those index countries with larger debt stocks by only including a specific portion of these countries’ eligible current face amounts of debt outstanding. MSCI Emerging Markets Index captures large and mid cap representation across 24 EM countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country. MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market. The index covers approximately 85% of the U.S. free float-adjusted market capitalization. The MSCI World Index is a broad global equity index that represents large and mid-cap equity performance across 23 developed markets countries. It covers approximately 85% of the free float-adjusted market capitalization in each country. S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy.
A word on risk
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